I recently bought C at 51. I tend to buy a different stock each week and hold for a year. Over the last few years (rising market) there were very few that fell more than 10% so quickly. Now with this "correction", C has fallen quickly and I am considering buying more C (I do understand that it can continue to fall). Does anyone have a method, system, criteria for averaging down? For example, buy an equal amount of shares, or original dollar amount or half as much or other criteria. Joe. Edit: Typo
lol here's a contradiction for you: I can't think of a better way to lose your ass than averaging down. On the other hand, if your correct with your analysis it's a life changer. Home run, you just bought a great company on the cheap. Do the happy dance--- you're freak'n rich Now you must figure out the difference between averaging down and buying cheap. I can't tell you. I can tell you were are entering into a market phase that is one of my favorites for using this strategy. Keep your powder dry.
It's those rare events that cause trouble. Price values can continue decreasing. Averaging down can wipe out a trader. I find it helpful, when considering a trading method, to ponder the worst case scenario.
If you truly know how to fundamentally value a company then yes, averaging down is picking up value that will ultimately yield good profits, but you better understand that company inside and out. Never average down for the sake of lowering your cost basis. You have to have a damn good reason.
I like FINANCIALS and what I like about C is their global approach to enter new markets ! A truly global player ! So far correction took place ( 18 % ) and my humble opinion on the stock is : BUY NOW ! World economy is in good shape - should support C anway !
Imo, a textbook average down scenario would be to double your original postion. I wouldn't average down based on a particular price point but some do average down on a particular time frame via dollar cost averaging. I might average down on a particular catalyst since the time frame is a year. Another thought might be to buy 1/2 of your position, then buy the other half using one of the above.
Thank you for the replies. To answer a couple of issues mentioned in previous posts, my criteria for purchasing C in the first place is still the same and now even more so at this new IMO attractive price. I purchase all my stock for cash (non-borrowed) and do not use margin if this info is of any additional help in answering my question. Joe.
Personally I wouldn't buy the stock until it at least makes a closing break over its current downtrend. It has an excellent chance of dropping to 41. You won't make as much money waiting for the trendline break, but you will increase the probability of success.
Follow Grail and RCanfiel's advise. It is good. Personally, if my time horizon was 1 year out, i would not be buying anything right now (well gold perhaps), especially bank stocks. But if you insist, definitely follow Grail's advice and wait until vital signs return to your stock, and personally i'd wait until they return to the banking industry. Don't worry about getting in at the bottom. Worry about getting in before the bottom and then bottoming and staying there for three years! When stocks are down they are down for a reason. When you buy a stock because you think it is cheap you are in effect saying the market is wrong. Some people would say the market is never wrong. So be careful here. As Grail says, if you are going to average down, you had better have a damned good reason. Incidentally, i sometimes average down (or up) when day trading, But ONLY if the reasons for my original position become more compelling, and never if the reasons (market internals) are deteriorating or unchanged. You might apply this same approach to longer term investing. In other words, unless there is new information that further supports your original decision to enter the position, don't average down. Price movement against you does not make the reasons for your original position more compelling, it makes them less so. PS.: Time horizon is critical. You said your's was 1 year. My remarks are based on that.