All videos · NISM Series V-A · Chapter 9
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How a SIP lowers your average cost
₹1,000 a month at NAVs of ₹10, ₹8 and ₹12 buys 308.33 units. The average cost is ₹9.73, below the average NAV of ₹10.
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Worked example: ₹1,000 a month for three months at NAVs of ₹10, ₹8 and ₹12 buys 100 + 125 + 83.33 = 308.33 units for ₹3,000. Average cost = ₹3,000 ÷ 308.33 = ₹9.73, lower than the average NAV of ₹10.
Exam trap: SIPs lower the average cost because a fixed amount buys more units at low prices, not because units are issued at a discount. Each STP transfer is a redemption for tax and exit-load purposes.
