The Comprehensive Guide to

Passive Income Investing


Learn the secrets of how Paul Tracy generates over $XXX,XXX per month in passive income!

How to Become Financially Independent Through Passive Income Investing

What is Average Down?

Average down (or averaging down) refers to the purchase of additional units of a stock already held by an investor after the price has dropped. Averaging down results in a decrease of the average price at which the investor purchased the stock.

How Does Average Down Work?

Suppose Bob holds 10 shares of XYZ stock that he purchased at $100 per share (for a total of $1,000). Following a market price drop to $70 per share, Bob purchases 10 additional shares of XYZ (for a total of $700). This results in an average purchase price of ($1,000 + $700)/20 shares = $85 per share, lowering the original cost per share by $15 ($100-$85=$15).

Why Does Average Down Matter?

Averaging down allows investors to lower their cost basis in a stock, reducing the amount the stock must rise in order to show a positive return. However, it also means if the stock continues falling, losses will be greater since more shares are now owned.

Ask an Expert about Average Down

All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Average Down.

Be the first to ask a question

If you have a question about Average Down, then please ask Paul.

Ask a question
Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.