Investing & portfolio
Averaging down: how to buy the dip with a plan
Advertisement
Ad (post-top)
What is averaging down?
Averaging down means buying more of an asset after its price falls, so your average cost drops. Done with a plan it can reduce the recovery you need. Done in a panic it can mean putting more money into something that never comes back.
Averaging down example: how the average price changes
Say you plan to deploy 10,000 on an asset priced at 100: 40% now at 100, 30% after a 20% fall at 80, and 30% after a 40% fall at 60. You end up with 127.5 units at an average price of 78.43.