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Originally Posted by Vegas69
So I have my 10 stocks and I'm getting ready to make my next purchase in a down market. Would you invest in one of your current stocks at a lower price than your initial purchase or buy a new company? My thought was to invest in a current holding. I believe you call that cost averaging? The next question is, would it be one of the best performers or worst?
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Good questions Todd!
So === I personally average in all the time. I added 5,000 shares of Altria (MO) on their "earnings miss". That buy in isn't enough to really bring my average cost down much (I already had 25,000 shares) -- but it makes me FEEL GOOD to buy it down a bit.
Two thoughts on your question of adding to biggest loser -- or best performer...
Examine WHY your loser is a loser.... this is critical to not try to "catch a falling knife" --- so WHY it's down is very important. If it's just down because of general market dipping --- or is there something fundamentally going on you need to be aware of.
Don't fear chasing market performance or growth. There's not a thing wrong with buying a stock or adding to shares when they're up a little. The shares are doing exactly what you wanted them to do - so why would that put you off? That's a rhetorical question.
If you feel you're diversified.... then adding to existing holdings rather than adding a new name can make you more comfortable in a down market... but sometimes if you're still trying to diversify - then the market has created a good opening for you to "get in".
I'd buy when the YEAR TO DATE price is in the 7 or 8% down... Remember that 2013 was far more than just an exceptional market... unlikely to be repeated. So 7 or 8% off "the highs" is a good starting point.
Remember that what is your worst performer this month - can be a good performer by year end. That's where patience comes in to play.