Patrick Stock Reading

Friday, February 19, 2010

Averaging Down

I was told.., maybe not... I read somewhere that averaging down may not be a good ideal, Without giving much though to it then, I took all of it at it face value. - "Don't catch a falling knife!" Well the author it right! Why bother to catch it, if you miss it you don't gain a bit and if you manage to catch it, you might cut yourself, why bother? Beside the gain may not be significant at all.

Now, I defer from that though and I trust that many would agreed, it depend on you objective in term of your investment time frame; whether you're a day trader or a long term investor. So did the author gives out the wrong information then. I thinks may be not, it is just that he is speaking from the day trader view that he may have not specify. OR did he may have mentioned it in the front few pages that I had missed it totally?

Somehow, I felt that it will be nice if the author could specificially remind reader that the time frame is one consideration if they are averaging down. For now, I'm much awared of my objective, thus it is not a concern whether I'm averaging down or up.

The key issue consideration is are we catching the knife for long term investment or for short term gain.

The above is not an advice, if you are looking for advice please speak to the professional.