Let’s say you bought a stock because the fundamentals looked solid, but then it dropped 10%, 20%, or even 50% over the next few weeks or months. What would you do in that case?
In theory, if nothing has changed fundamentally, averaging down makes sense. But sometimes it’s hard to tell if you missed something during your original analysis, and that’s why the stock is down.
Would you sell and cut your losses, hold and wait it out, or buy more?