Tag Archives: averaging down

Averaging Down as a Value Investor

Double down arrowEven the mention of averaging down among some investment circles will lead to a very quick and hostile education on their errors in your ways. Averaging down refers to a position entry strategy whereby the investor attempts to acquire more and more shares as the stock price drops. This results in an overall lower cost basis for the position, and allows more shares to be purchased than would have been possible with other methods, assuming a fixed amount of available capital. Those opposed to averaging down argue that you are only throwing money at a losing investment, rather than focusing on investments that are doing well. Which is correct? Let’s look at both sides of the coin. Continue reading

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