Before you average down, one question 🤔
Your stock is down big and half the comments say load up. Averaging down sounds like discipline. Sometimes it is.
Picture two people buying more on the same red day. 📉
The first owns a broad index fund. Hundreds of companies, sometimes thousands, and the index keeps swapping out the ones that fade. When that drops, she still owns basically the same thing, only cheaper. Buying more is the same bet at a better price.
The second owns one company. Made up, but you've seen the type: it just cut its outlook and lost its biggest customer. He's buying more too. Except the price didn't fall for no reason, and the business he liked six months ago might not be the one that exists today.
Same move. Totally different bet.
And it feels great either way. Your average cost drops and the red number in the app gets smaller. Nothing about the company changed because your average did. The market has no idea what you paid.
The check I run on my own stuff is one question. If I owned zero shares today, would I buy this, at this price, knowing what I know now?
If yes, adding is just buying something I already wanted. If the only reason is that I'm down and want to get back to even, that's a different thing wearing the same name.
Getting back to even is not a thesis.
Educational, not financial advice. Just my read.
