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Pastimes : Learning To Invest Correctly - A Shared Experience
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To: Bill Ulrich who wrote (4)7/24/1998 1:20:00 AM
From: EL KABONG!!!  Read Replies (1) of 253
 
MrB,

My opinion is that "averaging down" is fine when you're talking about a mid cap or a large cap stock. You might have heard it referred to as "buying on the dips".

But this practice should be avoided when you're talking about micro caps and even most small cap stocks. The larger companies have the revenues and financial reserves to withstand downturns in their income and stock price. Stocks with low capitalization do not always have these financial resources and therefore come perilously close to bankruptcy or reorganization, either event of which is catastrophic for the shareholders.

KJC
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