average down(redirected from Averaging 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.
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.