GREGG DIAMANTParticipantAugust 5, 2020 at 1:59 PMPost count: 4
I missed CAJ’s avg down. I am in it at around 29,30. It seems good to avg down now since it is way down–but want to make sure I am not missing something.
GreggSean HymanKeymasterAugust 5, 2020 at 2:02 PMPost count: 3399
Yes, if you haven’t averaged down, you’d want to consider it now.Neon806ParticipantAugust 6, 2020 at 1:37 PMPost count: 31
I have a follow up question to this post. When you miss an average down point, and arrive at the next lower average down point, do you use the allocated 2/3 funds for that lower position, or do you still only use the 1/3 allocation? Example: $1,500 total to invest in three equal dollar amounts ($500, $500, $500). You hit the first $500, miss the second, but hit the third. Do use $1,000 for that last tranche or still use the planned $500? So, if you only use the planned $500, then your total allocation would end up being $1,000 instead of the planned $1,500.FusionDudeParticipantAugust 6, 2020 at 1:53 PMPost count: 144
@Neon806 we always invest equal dollar amounts.
- no more than 3 buys
- equal dollar amounts
- at least 10% lower than previous buy
If your second buy is at the target price for the third tranche, then you look for a 3rd buy 10% lower than that. If you don’t get all 3 tranches in, then you profit sooner. All three buys are not required.
Sean HymanModeratorAugust 6, 2020 at 2:01 PMPost count: 2791
- This reply was modified 1 month, 2 weeks ago by FusionDude.
You can do both batches at the 3rd tranche if you missed the 2nd one. Because, ideally, you want to be fully invested by that 3rd investment level.FusionDudeParticipantAugust 7, 2020 at 12:37 AMPost count: 144
we always invest equal dollar amounts.
except when Sean says I’m wrong.Sean HymanModeratorAugust 7, 2020 at 12:45 AMPost count: 2791
Ha-ha. Well, it’s not wrong to do it that way but with as calculated as we are with the tranches, all 3 tranches may not get invested if all money isn’t in by what’s our 3rd tranche.
But, someone can start investing lower and go 10%+ wide between the tranches too. We just want deep values and wide averaging downs, either way.Neon806ParticipantAugust 7, 2020 at 9:23 AMPost count: 31
@FusionDude No worries. I have been wrong several times when it comes to some of Sean’s strategies that seem “counter-intuitive” at the time. Until you step in one of those landmines like I have and then you expand your understanding. That’s why I have learned to choke that pride down and ask the question. Thanks for the input!
Sean HymanModeratorAugust 7, 2020 at 9:52 AMPost count: 2791
- This reply was modified 1 month, 2 weeks ago by Neon806.
I’m just glad we all get to interact so much. Speeds learning curve.James MilesParticipantAugust 7, 2020 at 9:42 PMPost count: 59
On that note, if you are a new subscriber (I am not but have a friend that just became a subscriber) if the price is at the 2nd or third averaging down point would you invest 2 parts or 3 parts respectively when entering or do you start with 1 and then average down from there if it continues down?Sean HymanModeratorAugust 7, 2020 at 11:16 PMPost count: 2791
Start with one tranche. And then you can either do 2 tranches on the last tranche or 3 tranches all at least 10% apart.
The risk to the former is that the stock can go lower, but you’re still better off than all of us at the regular tranches.
The risk of the latter is that you may not get filled on your final tranche.
Either is fine. Why? Because we started investing at value levels and we lowered our breakevens even further by averaging down.
No one knows where bottom will be at on any stock ahead of time. So one just has to pick one way they’re comfortable with and stick with it. There will be individual instances where one would have been more advantageous than the other and vice versa.
But what’s the real goal? To buy low valuations and use a further drop to get an even better/lower breakeven.
If you got started lower than us, then your return is already likely going to either be higher, or you get profitable sooner. Either way, you’re better off than most of us, in those instances. So I’d not overthink it.Leslie HarvathParticipantAugust 8, 2020 at 8:57 AMPost count: 260Leslie HarvathParticipantAugust 8, 2020 at 10:33 AMPost count: 260
Right, Sean. I hadn’t realized that, so when Felipe & I worked together to set up his 2nd/3rd tranche limit buys, I only told him about the -10%/tranche in 2nd AND 3rd way. Just wanted to make sure he saw this since he is coming in at such low buy-ins. 🙂
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