Average down or “averaging down” is a slang term describing the process of buying additional shares in a company at lower prices than the original purchase price. This brings the average price you’ve paid for all your forex averageing in to a position down. 35, then purchasing more shares at a depressed price offers the appearance of a discount.
Averaging down does allow investors to lower their cost basis in a stock position, which can work to limit future capital gains. However, if a stock continues to fall, capital losses will only mount further. The strategy is often favored by investors who have a long-term investment horizon and a contrarian approach to investing. A contrarian approach refers to a style of investing that is against, or contrary, to the prevailing investment trend. Here again, averaging down can be thought of something of a rule of thumb: buy when there’s blood in the streets. Interestingly, over the years some of the world’s most astute investors, including Warren Buffett, have successfully used the averaging down strategy over the years.
Which further gives the illusion of this technique as an investment strategy. However, investors like Buffett may purchase additional shares of a company because they feel the stock is underpriced, not because they want to “average down. Average up is the process of buying additional shares in a stock that an investor already owns, at higher prices. A write-down is the book value of assets whose fair market value has fallen below the book value, and thus becomes an impaired asset. Average inventory is a calculation that estimates the value or number of a particular good or set of goods during two or more specified time periods. Weighted average is an average in which each observation in the data set is assigned or multiplied by a weight before summing to a single average value.