The Art Of Portfolio Management: Avoid The Mistake Of Averaging Down

The strategy of averaging down involves investing additional amounts in a financial instrument or asset if it declines significantly in price after the original investment is made. It’s true that this action brings down the average cost of the instrument or asset, but will it lead to great returns or just to a larger share of a losing investment?

Key Takeaways:

• This just as easily could’ve been about the stock market, because the market sometimes acts like a bad-outcome romance.
• Stock treats investor even worse. Investor pours more money into stock because this just can’t be true.
• Believe what they do. And never make excuses when they’re not doing what they should be doing. Just get rid of them.

“Investor meets stock. Stock treats investor badly. Investor puts more money into stock in hopes stock will realize the error of its ways.”

http://www.investors.com/how-to-invest/investors-corner/the-art-of-portfolio-management-avoid-the-mistake-of-averaging-down/