Tutorial: How To Average Down

So, you bought your first stock and see a Red portfolio. Don’t panic, it’s normal for most first time investors. Allow me to share a very interesting strategy called How To Average Down.

First, let us define few terms:

Portfolio % = If you own 1 stock it appears 100% ownership on your portfolio. If you own 2 or more stocks, the portfolio % ownership will be equally divided depending on the amount of capital for each stock.

Market Price = The actual stock prices of the stocks you own.

Average Price = This is computed in relation to the stock prices and amount of money for each stock. This is the most important part of this article. And this is where we will focus today.

Total Shares = Your ownership of the company. You have to believe that you are a part-owner of the company once you own a share of their stock, even if you only have the minimum share.

Uncommitted shares = On the event that you sell your share and nobody accept your offer, the shares become uncommitted for the meantime.

Market Value = The total money on each stock plus your gain or minus your loss is your market value.

Gain/Loss = The money you gain or loss as per your capital on each stock.

%Gain/Loss = The percentage equivalent in relation to your capital on each stock.

How To Average Down
How To Average Down

Now that we know the basic terms, let’s go direct to our topic How To Average Down.

Buy the same stock with at least the same shares and at least the same price.

Okay, here’s a clearer view:

Buy No. 1 = 2000 shares at 8.00 pesos per share, average price 8.02
Buy No. 2 = 1000 shares at 7.50 pesos per share, average price 7.85
Buy No. 3 = 500 shares at 7.04 pesos per share, average price 7.74
Buy No. 4 = 500 shares at 7.10 pesos per share, average price 7.67

***The example above is from my personal and actual transaction for CHP.

Important Notes about this Average Down strategy:

  • You need to set aside a small amount of capital to average down.
  • You need to be vigilant of the stocks price after your first purchase.
  • There is no exact time gap on when to execute your next purchase. When the price goes down, buy!
  • The lower your average price, the higher your GAIN!
  • Don’t listen too much on facebook comments instead focus on your own portfolio.
  • This strategy needs time and experience to execute.

P.S. The Average Down strategy is very effective for long-term investment only.

3 Steps To Building A Profitable Portfolio

Our tagline says: A Better Portfolio For A Better Life

What is a Portfolio? How to make it better? And finally, How to make a Profitable Portfolio?

Profitable Portfolio
3 Steps To Building A Profitable Portfolio

These are the basic and most emotional questions investors like you and me ask everyday. Let us try to break them down and answer these questions carefully.

A very simple, 3 steps to building a profitable portfolio will be presented to you today. Take a look on it and maybe you will find this applicable to your own investment plan and strategy.

What is a Portfolio?

A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, as well as their funds counterparts, including mutual, exchange-traded and closed funds. Portfolios are held directly by investors and/or managed by financial professionals. Prudence suggests that investors should construct an investment portfolio in accordance with risk tolerance and investing objectives.

Meaning, once you open an account from a stock broker like COL Financial and bought your first stock, you are already managing a portfolio.

 

How to make it better?

You can make your portfolio better by carefully studying your actions. Also by carefully studying your personal desires, your future plans and most of all your current financial situation. Many didn’t notice that your portfolio reflects your personality. The stocks you are holding identifies your personal interests and wants. Because your portfolio is the product of all your actions.

Scenarios:

  • You want to buy your first stock. I believe before even arriving at this point, you already have an idea what stocks you want to buy. But, you need an approval and a Thumbs up or a pat on the back from someone who will guarantee you that the stock is good for you.
  • You want to add a new stock. Similar to the first scenario, you need an approval, you want somebody to tell you, go on! Buy that stock because it is good.
  • You are not happy with the stocks you have. This scenario is a little bit difficult. Many friends I thought how to invest became trap on this scenario. Why? Because, they are experimenting. They are buying stocks out of the recommendations. The result is awful. Their portfolio is all loss and mostly they lost hope. We don’t want this to happen to you. Please be careful and stay with our recommendations on the Stock Pick list.

In other words, to make a better portfolio requires a constant attention. Look at your portfolio once in a while. How often, once a day is a good habit.

 

How to make a Profitable Portfolio?

This is the heart of this entire article! So, lets go straight to the point. To make a profitable portfolio, do any or all of the following:

Step 1: Diversify your Portfolio

This is not very applicable to newbie investors because you only have a few stocks in your portfolio. For those who have at least 100,000.00 or 200,000.00 Thousand pesos in their portfolio, this is for you. To diversify your portfolio, simply assign a number of percentage on each stocks on your portfolio. For example, you have 10 stocks with stock 1 is 20%, stock 2 is 20%, stock 3 is 20%, stock 4 is 20%, stock 5 is 20%, stock 6 is 20% then stock 7 is 10%, stock 8 is 10%, stock 9 is 10% and stock 10 is also 10%. Meaning, the money invested on stocks 1-6 is bigger than the money invested in stocks 7-10. The reason is to minimize the risk of loss.

Step 2: Do Cost Averaging on your Portfolio

It simply means, whether the stock prices are down or up, buy regularly. Regularly means, at least once a month. Because our aim is to lower our Average Price and hold more shares of the stocks. This is very important that if you do it regularly, you will see and appreciate the effect in the long run.

Step 3: Always keep money on your Buying Power

Cash is King! As an investor always put that in your mind. And I will repeat, Cash is King! The stock market is very unpredictable. Today, you see it green the following day, you see it red. Nobody knows what will happen tomorrow. But, one thing is for sure, it is always going up in the long run.

So, that’s it! The 3 Steps To Building A Profitable Portfolio! They are very easy to follow but needs a lot of patience and discipline.

I wish you all the best in your stock market investment.

As always, keep on learning and earning soon.

 

Here are some screenshots of stock market investors.

Note: Portfolio owners post this on financial facebook groups as public. If you know any of the owner and wish to remove this screenshot here, message me using our contact form, thank you.

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