Replies to post #14229 on Value Microcaps Motherboard

[otcbargains]

I also have a psychological aversion to averaging up.

But i have made an exception for cgnw as i have felt that the story has only improved and has become increasingly undervalued despite a 150% move since my initial purchase.


All in all, i think averaging up is a smart thing to do when the fundementals support such a move. I dont however do it very often.

[Guy]

Stan, yes, i have a problem averaging up. I think
that maybe once or twice in my life i averaged up.
That is because of the same reasons you mentioned.

[MSGI]

stanu, Averaging up. I almost always average up. I trade in 4 accounts. If I see a stock that I like I usually buy that stock in all 4 accounts. Once the stock has moved up 10%, I double my position in all 4 accounts. Now, by doing this, I have eleminated loading up on stocks that don't go up because if that orig investment doesn't move up shortly after my purchase, I sell it in all accounts. As good as most stockpickers are on this board, we all know of stocks that just seem to have great earnings, but for some reason just don't go up. CXTI and SWTX come to mind. Now by doubling up after a 10% increase, the stock now has to drop 5% before I'm in the hole. That is a nice cushion to have.

I hardly ever buy more after that second purchase.

[John Bates]

Averaging up? I do it all the time, often at much higher levels. I know I have to watch getting carried away with momentum, but generally if something is working, I want more.

Averaging down? I got into a lot of trouble in my first years of independent investing ('93-'96) by doing this and it now runs against my grain. There were some interesting story stocks that may initially have been reasonable bets, but should have remained a small portion of my portfolio. By averaging down, I ended up owning far more of these than I wanted or could tolerate. I mean, I really didn't like the companies that much to begin with and ended up loaded.

I also think it has somewhat to do with my mindset. I don't really look at my portfolio as a series of trades in process, and am primarily concerned whether the whole ship is going up or down. I often don't know where I started buying something, unless I check my software. So, I don't care if buying more affects the number of bags, or whatever. I don't think this is necessarily better than the trader's focus, but it's what I'm better at.

Of course, there's the alternative to "averaging down" of "getting out and getting back in later". I do that a lot <g>.