My Basic Checklist Before Adding to a Losing Position
A lower price does not automatically deserve more money.
Before averaging down, I ask:
Would I buy this company today if I did not already own it?
Is my thesis stronger, weaker, or unchanged?
Am I adding because the opportunity improved, or because I want a lower average cost?
Averaging down can be smart.
It can also be an expensive way to avoid admitting you were wrong.
