Multiple choice

A criticism of rupee-cost averaging is

  1. investment is for the same amount at regular intervals

  2. over a period of time, the average purchase price will work out higher than if one tries to guess the market highs and lows

  3. it does not inform an investor when to buy, sell or switch from one scheme to another

  4. Rupee cost averaging has no serious shortcomings
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The main criticism of rupee-cost averaging is that it's a mechanical investment strategy that doesn't provide any guidance on when to buy, sell, or switch between schemes. It simply involves investing a fixed amount regularly regardless of market conditions, which means investors might continue investing in overvalued markets or miss opportunities to exit from underperforming investments.

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