Averaging down on a losing position is perhaps the most common yet the most dreadful sin investors keep committing as they surrender to their psychological selves over their rational selves.
A good read on the common pitfalls, invert and you arrive at when to actually average down
You should only average down when:
- The business is accelerating.
- The business is profitable with no financing risk.
- The business has a sustainable growth trajectory.
- The business doesn’t have a lot of debt.
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