Averaging Down
Averaging down is an investment strategy where an investor buys additional shares of a stock as its price declines, reducing the overall average cost per share. For instance, on Day 1, an investor buys 10 shares of XYZ at Rs. 1000 each, costing Rs. 10,000, with an average cost of Rs. 1000. On Day 2, as the price drops to Rs. 900, they buy 10 more shares for Rs. 9,000. The total investment becomes Rs. 19,000 for 20 shares, lowering the average cost to Rs. 950. This approach aims to improve potential returns if the price rebounds.
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