AVERAGING DOWN STOCKS FOR BEGINNERS
To define averaging down for beginners, it is somewhat like dollar cost averaging except it only takes place when you have a stock loss. Just like many other financial terms in the stock market, averaging down is just a fancy way of saying that you are going to buy more of a stock once it has gone down. That way, you will have your initial purchase at a certain price (lets say $100 per share) and if the stock goes down to $80 you buy more. If you buy the same number of shares the second time, you have “averaged down” the price of all your shares to a $90 price.
With the stock market doing so poorly for the last couple of years, we have all been faced with the question of “should I average down”? Almost all stocks have taken a hit and left opportunities for anyone in at higher prices to average down their stocks. Some people did that and where disappointed to see the market continue to go down more so they have just lost more money.
If you decide to buy more of a stock you already own, you are just buying more at a lower price. No fancy terminology like “averaging down” is really needed. Once you learn how to buy stock online, you then need to learn what terms mean something and what terms can be ignored. Averaging down stock is one that is not real meaningful and can certainly be learned easily.
