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04/05/17
17:47
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Originally posted by longgame101
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I find the strategy of bringing one's average price down an interesting one. I've done it myself and it is quite satisfying if & when the price strengthens and you attain break even at a lower point to where you might have been had you not averaged down.
If you bought initially at $5, bought some more at $4, bought some more at $3 you might have a $4 average but if you spent the same amount each time you have 3 times the amount invested than you initially were prepared to commit. And you have it committed to a company experiencing challenges possibly big ones.
You don't hear much of people proudly saying - Hey I picked up some more CSL today and its really good because I bought my average cost up from $90 to $110. And yet it probably is the better strategy.
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It is a good strategy as long as the company succeeds. In the case of SGH, people averaged down until its almost death. Although they are different companies, its a fact to be aware of.