average down

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Average down

A strategy used by investors to reduce the average cost of shares, in which the investor purchases more shares with a fixed amount of capital as the price of the shares decreases. The investor receives more shares per dollar and decreases the average price per share.

Average Down

To buy more shares in a publicly-traded company in which one already owns shares after the stock price has gone down. Averaging down lowers the average price at which one buys the stock, which, if the price goes back up, will increase one's profit when one sells the stock. However, averaging down carries the risk that the stock will continue to decline.

average down

To purchase shares of the same security at successively lower prices in order to reduce the average price at which the stock was acquired. If an investor buys 100 shares of Disney common stock at $40 per share and the price subsequently falls to $30 per share, the purchase of an additional 100 shares would average down the investor's cost to $35 per share. Opponents of this strategy argue that the investor is simply throwing good money after bad and would be better advised to sell the stock, having realized that a mistake had been made to begin with. Compare average up.
References in periodicals archive ?
But of the statistics, Swann said: "Some players abide by them and know their averages down to the 10th decimal point but I've never been like that.
Newhall has the city's largest concentration of non-English speaking students, who were tested in English, and thus brought overall averages down, Superintendent Marc Winger said.
The Newhall district has the highest percentage in the Santa Clarita Valley of non-English-proficient youngsters, which Winger said brought averages down because the test was administered in English.