stop-losses are a waste of time. suppose you set a stop-loss and the share price dips below your stop-loss and you end up selling your shares !
the great thing about averaging down is your shareholding only ever increases. you put more skin in the game which means you really benefit when the share price goes up.
So say you bought 1,000 AGO at $1 and your stop loss triggers at 90 cents, you've lost $100. You take you're $900 buy a few pints, and think how lucky you are.
But if you've got your wits about you and a bit of ticker you keep the 1,000 at $1, then buy 2,000 at 50 cents, then 4,000 at 25 cents, then 8,000 at 12.5 cents. Your brilliant investment strategy means you own 15,000 shares at an average of 26.7 cents, which really has brought your average down. But if the share price is now 2 cents you're total investment of $4,000 to achieve an average of 26.7 cents is now worth $300.
Which is why, folks, people have lost their houses by "averaging down". As a strategy, 9/10 it will see you living out the back of a Holden Commodore in carpark in Balga.
AGO Price at posting:
2.0¢ Sentiment: None Disclosure: Not Held
