Originally Posted by teal
Originally Posted by Hotload
Originally Posted by antelope_sniper

..... dollar cost averaging, ......


?


I always looked at it this way:

1. I find a company (investment) I like. No emotion. The fundamentals are sound, leadership is good - everything tells me this company, over the long haul, is going to provide a good return on my investment.

2. I buy 10 shares for 200 dollars. My cost per share is 20.

3. Something happens, a run on the markets/industry that doesn't necessarily have anything to do with my company (investment) directly. Share price falls to 10 dollars per share. People get spooked - they see they just lost 1/2 their money and forget WHY they made their choice. Lots cut bait and bail.

4. At this point you buy another 20 shares for 200 dollars. You now have 30 shares at an AVERAGE cost of 13.34 per share. All that now needs to happen is for your share price to rise above that average cost and you're ahead. It has to break 13.34 $/share instead of 20 $/share. You've dollar cost averaged your investment down.

So long as WHY you invested in the company hasn't changed dramatically (management change, massive changes to the world situation etc) - the company/investment still makes sense and happened to be hit by general volatility in the market- buy into the dip. Don't be emotionally invested, pay attention to how the COMPANY is doing, not the market and you should be okay.

Now I'm sure more sophisticated people here will tell me I'm way wrong but it's just how I see things - looking in from the outside.

"Know what you own, and know why you own it." - Peter Lynch


You are not wrong.

A short term trader should not average down. If the market tells them they are wrong, they need to get out and look for another trade.

As an investor, you philosophy is generally sound. Keep in mind it is necessary to examine both the micro and macro factors affecting your stock, either could make it necessary to rethink your investment thesis.

You didn't use logic or reason to get into this opinion, I cannot use logic or reason to get you out of it.

You cannot over estimate the unimportance of nearly everything. John Maxwell