Some of the investors slowly increase the exposure to stock from initial 25% to 100%, as the stock becomes undervalued and become more attractive. This staggered buying approach ensures that, you get an opportunity to reduce your average purchase price as the risk reduces at lower prices, assuming that fundamentals are intact.
After this you should hold for longer duration so that when it gets overvalued, you can sell or you can sell in staggered manner as well.
Personally I have used the strategy of staggered buying to increase the buy position from 25% to 50% or some times 100%, but the time it takes to give meaningful returns is much higher than buying full 75% to 100% at low valuations.
If you are willing to hold the stock through the down cycle and also ready to hold for longer time, it can generate reasonable returns.
But if are ready to wait for lower valuations and then buy full 100%, and if you are lucky, and market turns around then you can get very good returns in 1-2 years as well.
Each strategy has its own pros and cons.
For fundamentally strong business, staggered buying or SIP might be good but not for all the businesses.
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