This is on my radar today because of Musicwhiz. He’s written a post describing the cognitive bias and thought process that go into whether one should average down (or up). This I think will be highly beneficial in the near future. While his posts can be lengthy, they are extremely succint in delivering the points they need to deliver. (link here) In short, his message is, you have to know what you’re buying before you average down (or up).

Similarly, The Big Picture has some advice on this as well. (link here)

My own method is to have valuations you can trust on the stocks you’re holding. Sell when it hits your Sell Price and Buy when it hits your Buy Price. Sounds easy? It isn’t, not when you have to wrestle with greed and fear and then you start second-guessing all your valuations by asking inane details like whether you should include dividends. *sigh* I can only hope that one gets more hardy with age.

 

 

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