What is Average Down, or Dollar Cost Averaging? Perhaps you have a favorite stock that has been steadily increasing in price and performing well. Then a great opportunity comes along when the price drops, so you buy some additional shares.
Called averaging down, your average price for all the shares you own on that stock has now decreased. "Who cares?" you might ask, but if you are measuring the cost basis for that stock, this reduces the amount the price has to go up in order for you to show a profit. But you also risk losing more money if the price continues to go down. Let's say you own 20 shares of Pull Me Down, Inc. that you bought for $150 per share, for a total value of $3,000. Then one day you notice the price has dropped to $100 per share, so you decide to jump on the opportunity and buy 20 additional shares for a total value of $2,000, since you really believe in the future profitability of the company. Your average purchase price is now $3,000 + $2,000/40 shares...to equal $125 per share, lowering your original cost per share by $25.
Some investors would view a price drop as a positive, while others caution that it is a sign the stock might go down further. Experts recommend that you average down only for blue chip stocks that have a positive long-term track record, good cash flow and not a lot of debt.
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Finance: What is a Fallen Angel?1 Views
Finance a la shmoop what is a fallen angel? oh oh so sad I was once loved as [Sears crying]
were we all we were angels we floated way up here above the clouds above the
hundred times earnings high multiple-o- sphere but then we stumbled we failed
the market turned the environment saddened competition came and we did not
adjust so we fell as we missed our earnings numbers again and we missed
them again and again yeah it was just like that
a fallen angel is a company that used to be loved by everyone on Wall Street it
was the next Google the next Facebook the next Amazon heading oh so high to [Sears rocket flying in the sky]
the sky with no ceiling in sight but then well the ceiling actually came into
sight and got hit and the company missed a quarter and the multiple of earnings
the stock traded at got hit and the company fell again and again and again
and each time flew lower to the ground from the lofty lovely views of the
hundred X club a hundred times earnings club that's a very high multiple to be
now single-digit world of boring companies at six seven eight times
earnings yep no banker love barely any coverage even on Wall Street like nobody
even bothers to write about the companies anymore [Newspaper article appears]
it's just a bunch of vultures picking at their wings...hey! stop that yeah well
maybe someday they'll figure things out and you know get back up there where we
belong or where we used to or something like that it's so sad for now well
they're just hoping their wings grow back you know like these guys are hoping [Fallen angel companies grow wings]
yeah keep hoping there Sears
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