EssDeeAitch wrote:
I have some funds to execute a top up, but not enough to enter a new position.
You don't
have to enter into a new position
in one go - if trading costs are not punitive, then building a position over a number of trades in a new HYP option might well be worth considering, certainly if you've got access to low '
regular trading' costs with your investment account (they don't have to be regular-trades, the idea is that you just take advantage of a single trade with this process, and then turn it off after the trade...), and
especially if you're perhaps using this view as an '
excuse' to....
EssDeeAitch wrote:
I have WPP and SLI in my HYP (I can almost hear the violins playing) and having bought these at the wrong time, both are cheap compared to my initial purchase price.
I have three questions:-
1 - Is it a good idea to top up stocks whose price has dropped to "average down"?
This is impossible to answer. The only way you'll ever know if this was a 'good idea' is at some future point.
What I will say is that I have hard experience of this being absolutely the worst thing I could have done, on a number of occasions when I did it....
You'll hear people talking about '
falling in love' with a share, and becoming emotionally attached to a share as '
an idea', and I think there's sometimes a great deal of truth in that, and I think this is often
especially true when we've seen a purchase subsequently
drop substantially in price - we convince ourselves that we could never have been '
wrong' to buy it in the first place, and as '
concrete evidence' of that belief, what would be better than actually
purchasing more of that investment, to '
prove to ourselves' that we were right to purchase it in the first place, with the added benefit of perhaps being able to '
hide' our
initial purchase-mistake by massaging the figures with a, perhaps much lower, '
average-down' price of the final, complete holding....
If that rings any bells, for anyone at all, then it's meant to, because it's certainly how I've made HYP mistakes in the past, and lived to regret them...
Cheers,
Itsallaguess