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.
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 ?
As LendingTree's data shows, the average down payment for a home is decreasing and loan amounts fell.
Canada drags that average down. We invest 1.9 per cent.
With the Dow Jones Industrial Average down 25 points as trading in London closed, the Footsie slipped back below the 4200 support level to close at 4198 - an 8.4-point loss for the day.
The NHS target is to increase the number of GPs by 6 per cent, bringing the average down to 1,795.
When you compare academic characteristics, average class size is not a meaningful statistic, because large numbers of tiny graduate and senior seminars keep the average down. An institution with an average class size of 12 can still pack hundreds of students into introductory classes.
Turmoil in the Middle East and oil concerns sent the Dow Jones Industrial Average down 379.21 points on Oct.
In Hawaii, stocks were down with Digital Island (ISDL) leading the Hawaiian Industrial Average down over 6 percent for the month of July.
The average down time between relay heats is about three or four minutes, even when the p.r.
Some will advise you to "average down" by buying more shares.
The reality is that the average down payment for a first-time buyer is about 6% -- and often less.
And it brings the 4-week moving average down to 205.75k versus 208k previously.

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