Understand The Strategy Of Averaging Down

[StockmanNigeria]

What Is Average Down?

Averaging down is a portfolio management strategy that involves buying more volume of the same stock at a cheaper price when its price declines. This brings down the average cost (per share) of acquiring the stock.

For example, a StockmanCooperative bought 100,000 Units of Zenith Bank Plcshares at N20 per share. Recently, StockmanCooperative purchased additional 100,000 units of Zenith shares at N10 per share, thus bringing the average purchase price down to N15 per share.

Please note, we can only encourage any investor to deploy this portfolio management strategy only if s/he is buying and holding for long term period. In other words, accumulating more stock at a lower price only makes sense if you plan to hold it for a long period of time.

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PLEASE YOU MAY ASK YOUR QUESTIONS AS A COMMENT OR REPLY BELOW

[NanaProctor]

I ask my mentor from https://mobile.twitter.com/astrotradingio if averaging down is a good strategy then He said the primary benefit of averaging down is that a financier can lower the ordinary price of a stock holding significantly. Thinking the stock reverses, this makes sure a reduced breakeven factor for the stock placement and also greater gains in buck terms, contrasted to the gains if the setting was not averaged down.

[Kunle]

More Insight on Averaging Down
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As an investment strategy, averaging down involves investing additional amounts in a financial instrument or asset if it declines significantly in price after the original investment is made. While this can bring down the average cost of the instrument or asset, it may not lead to great returns

It might just result in an investor having a larger share of a losing investment, which is there is a radical difference in the opinion among investors and traders about the viability of the averaging down strategy.

KEY HIGHLIGHTS
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Averaging down involves investing additional amounts in a financial instrument or asset if it declines significantly in price after the original investment is made.

Averaging down is often favored by investors who have a long-term investment horizon and who adopt a contrarian approach to investing, which means they often go against prevailing investment trends.

Averaging down is only effective if the stock eventually rebounds because it has the effect of magnifying gains; if a stock continues to decline, averaging down has the effect of magnifying losses.

Averaging down is best restricted to blue-chip stocks that satisfy stringent selection criteria, such as a long-term track record, minimal debt, and solid cash flows

[BeverleyBarker]

I ask my mentor from https://mobile.twitter.com/astrotradingio if averaging down is a good strategy then He said the primary benefit of averaging down is that a financier can lower the ordinary price of a stock holding significantly. Thinking the stock reverses, this makes sure a reduced breakeven factor for the stock placement and also greater gains in buck terms, contrasted to the gains if the setting was not averaged down.

Your mentor from https://mobile.twitter.com/astrotradingio was such a good one. One thing I can share if volatility climbs when stock loss. When there is even more of something offered than individuals wish to get, the cost drops. When there isn't sufficient for every person, the rate rises. Stock operate in all the same means, with costs rising and fall based upon the variety of individuals that intend to purchase versus shares readily available up for sale.

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