As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

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Value Investing
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Monday, 3 June 2013

Average Down or Pyramid Up? (4)


Read? Average Down or Pyramid Up? (3)


The Greatest Sin ever committed by newbies in the stock market and get their backside badly burnt!






What do you think it is?


















They keep averaging down their beloved stocks!!!


If you still don't believe, you can go around and visit investment and trading blogs to find out yourself.

Once you have locked in massive losses and negative return, it is extremely difficult to recover unless you have the financial strength to pump in massive investing capital again.


Don't ever attempt it or you regret it for long, long time!

Read? More on Average Down


























3 comments:

  1. Hear hear!

    Been there; done it.

    I guess most of us have to go through this baptism of fire to emerge wiser (provided we survive of course).

    Only then can we tell the difference between averaging down and scaling in.

    It's not just semantics. It's the true test between what we think we know and what we really know.

    That to me it's the greatest risk in trading/investing.

    ReplyDelete
  2. If the company is still fundamentally sound and profittable and the decline in price is due to macro economy outlook, i don't see anything wrong with averaging down.

    ReplyDelete
  3. Let's assume the company's fundamentals are fantastic. Now if you pyramid down 1,2,3,4,5; is it really the same as pyramid up 5,4,3,2,1. Presuming everything being equal. For one (one of the most important) you are always in the money when you pyramid up. This means the market is saying you are right about the fundamentals of this company.
    The main problem with both methods is who can really knows the falling knife has struck the bottom. When should i start to pyramid up? In practice, nothing is perfect.
    Actually, the most important is still the fundamentals of the company.

    ReplyDelete

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