Tips and Tricks

Don’t Average Down

Most investors try to make up for their mistakes by putting more cash into a falling stock. For example, if the shares drop 30% or 50% or 88% in value after their original purchase, they buy even more of the stock. This makes their average price per share lower.

There are problems with this tactic. First of all, the investor was wrong about the shares in the first place. Also, the investment is probably falling for a reason, and in most cases it has plenty more downside to go. As well, the investor has just put more of their (probably) small portfolio on the line in shares that are trending lower!

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