average down

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Also found in: Idioms.

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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
The recent sell-off was limited as some long-term investors, who have long held onto their shares in Solidere, adopted an averaging down strategy, Aoun said.
Averaging down is the process of buying additional shares in a company at lower prices than originally purchased, which brings down the average price that was paid for all shares.
Averaging down into this type of situation can be a prescription for disaster.