Average Down

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Systematic Investment Plan - SIP

    This is a plan where investors make regular, equal payments into ...
  2. Dollar-Cost Averaging - DCA

    The technique of buying a fixed dollar amount of a particular ...
  3. Value Averaging

    An investing strategy that works like dollar cost averaging (DCA) ...
  4. Adding To A Loser

    The action of a trader/investor increasing a position in an asset when its ...
  5. Average Up

    The process of buying additional shares at higher prices. This ...
  6. Scale In

    The process of purchasing shares as the price decreases. To scale ...
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 Full Answer >>
Related Articles
  1. Markets

    Buying Stocks When The Price Goes Down: Big Mistake?

    Averaging down is a trumpeted strategy that has merit, but when it is used carelessly, it can amount to throwing money away.
  2. Insurance

    Take Advantage Of Dollar-Cost Averaging

    We explain how dollar-cost averaging offers protection and opportunity in a sinking market.
  3. Entrepreneurship

    Five Investing Pitfalls To Avoid, According to Investor's Business Daily

    Common sense or common folly? Discover some approaches to circumventing typical stumbling blocks on the road to profitable investing.
  4. Investing Basics

    What is the Stock Market?

    A stock market is where shares in corporations are issued and traded. Stock markets are key components of a free market economy.
  5. Investing

    Commercial Paper

    Commercial paper is a short-term debt security issued by financial companies and large corporations. The corporation promises the buyer a return, or profit, for making the loan. The return is ...
  6. Investing Basics

    Why Do Penny Stocks Fail?

    Penny stocks are speculative and highly risky investments. Lack of government and stock exchange oversight and general information leaves penny stock investors open to sudden losses.
  7. Active Trading

    What's a Marketable Security?

    Marketable securities are financial instruments that can be readily bought and sold in a public market. The key feature is the ease with which it can be sold and converted into cash. Usually, ...
  8. Stock Analysis

    Buyinb Facebook Stock, A Beginner's Guide

    This straightforward guide helps the novice investor feel more adept at buying a stock, such as Facebook (FB).
  9. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  10. Investing News

    Alibaba's Top Competitors

    A look at Alibaba’s top competitors to understand perceived and real competitive threats to the Chinese ecommerce giant.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center