Of course, we always seek to maximize the buy side. At the same time, it can take precedence and nobody will convince me that it's the only way to go about investing. So I average...
By that, I mean I try to apply a cross-sectional view towards my adds (accumulation broken down into individual transactions). And in the end, each completed buy order goes through the brokerage's milling machine only to spit up my cost basis reflecting it all.
Say I have 500 shares of CIM at a CB of $14. I add more and then more again at prices beneath the original $14, bringing my CVB down to $8 or $10 or whatever. Viewed through the peephole established by my original purchase I've done well, right? But hold on---if viewed on the averaged (revised) cost basis, my overall basis may be down to $11. What makes that good?
I can look at that now and say it's good because it reflects a gain/share. Or it may be the other way around and not represent a gain. However.............
I didn't buy it thinking I was going to gain on the appreciation side. No, I wanted income. So I toss aside any and all considerations about appreciation and focus only on the dividends and their sustainability. And thus I'm free of concern if the price drops.
There are many opportunities out there for us to capitalize on appreciation gains. I don't see CIM as one of them. But if you do, then I'd like to hear more about it from you.
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