Leslie, that’s a great way to think about it. Yes. averaging downs are similar to insurance policies trying to protect our positions. The reason why I say similar to is because…while it can’t 100% ensure a profit, it lowers and lowers the bar of what it takes to get profitable thus greatly increasing the chances that it can overcome the much lower bar (lower breakeven price) that the averaging downs afford.
Also, those last two investments, especially the 3rd tranche is SO powerful because since we buy at equal dollar amounts (instead of equal share amounts), you own SO many more shares at such a choice/low level.
Another way to look at it is that a 2nd tranche has a higher weighting and the 3rd tranche has an even higher weighting, among your overall position. So your “best” position is your lowest position. It’s a great, strategic way to invest that is almost as important as the actual investing system itself.
- This reply was modified 2 weeks, 2 days ago by Sean Hyman.