DEFINITION of 'Average Down'

The process of buying additional shares in a company at lower prices than you originally purchased. This brings the average price you've paid for all your shares down.

BREAKING DOWN 'Average Down'

Sometimes this is a good strategy, other times it's better to sell off a beaten down stock rather than buying more shares.

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RELATED FAQS
  1. If I own stock that drops in price is this a sign that I should buy more?

    This is a good question, and the answer has two parts. First, let's address the concept underlying the strategy to which ... Read Answer >>
  2. What's the smallest number of shares I can buy?

    Unlike mutual funds, which can be purchased in fractional units, shares of stock cannot be divided. So, the smallest number ... Read Answer >>
  3. What is the cost of a share purchase?

    Find out how the total price of a share purchase is dictated by the current stock price and the fees the brokerage company ... Read Answer >>
  4. How do I figure out my cost basis on a stock investment?

    The cost basis of any investment is the original value of an asset adjusted for stock splits, dividends and capital distributions. ... Read Answer >>
  5. How can a company trade more shares in one day than there are shares outstanding? ...

    The number of shares traded in a single day can be greater than the number of a company's outstanding shares, but this is ... Read Answer >>
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