Averaging Down
Averaging down means buying more of a declining investment to reduce average cost per share or unit.
Dollar-cost averaging, value averaging, formula investing, and contribution or rebalancing rules used in portfolio implementation.
Averaging and contribution strategies convert a funding plan or target allocation into repeatable purchase and rebalancing rules. They govern when and how much capital is invested; they do not determine whether the selected assets are fairly valued or suitable for a particular investor.
Use Dollar-Cost Averaging for fixed contributions, Value Averaging for a target portfolio-value path, and Formula Investing for the broader family of preset allocation, contribution, or signal rules.
| Term | Use it for |
|---|---|
| Dollar-Cost Averaging | Invest a fixed amount on a recurring schedule. |
| Value Averaging | Vary contributions or withdrawals to follow a target value path. |
| Formula Investing | Apply predetermined allocation, contribution, ranking, or rebalancing rules. |
| Averaging Down | Add to a position after its price falls, with concentration and thesis risks. |
Check the objective, available cash, time horizon, contribution formula, allocation range, rebalance threshold, liquidity, tax setting, transaction costs, and conditions for suspending or changing the rule.
This page is educational and does not recommend a specific investment strategy, security, tax treatment, or account choice.
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Averaging down means buying more of a declining investment to reduce average cost per share or unit.
Dollar cost averaging invests fixed amounts over time, reducing timing risk by buying more shares when prices are lower.
Formula investing applies predetermined contribution, allocation, selection, or rebalancing rules instead of making each portfolio decision ad hoc.
Value averaging adjusts periodic contributions so a portfolio follows a target value path over time.