Glenn, please pass this on to Bill Harmond.:)
>>My Dumbest Investment
Gone Fishing
In the early '70s, when the market began its nose-dive, I liquidated my portfolio of AT&T, which at the time was trading around $60 per share. I then bought many shares of TWA at $28. The year before, it was trading at $108. As it continued to fall, I bought more and more, much of it on margin (borrowing money from my broker). After weekly margin calls requiring me to cough up from $200 to $800 because of the falling stock price, I finally sold at $17 per share. I've since limited my bottom fishing to halibut!
– Steve Fanter, Escondido, Calif.
The Fool Responds: Ouch. It's often not good to "average down," buying more shares of a stock as it falls, to lower your average buying price. It works well if a healthy company is temporarily in a slump, but not when a firm is in serious trouble from which it may not recover. If you're not sure which is the case with a falling stock you own, don't buy more. Margin should be avoided, too, or used in moderation
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