Hi. Can someone please give me the heads up here as I might have the wrong idea.
If you have a pie and the selected instruments are doing well; wouldn’t buying more stock then just dilute your investment as you’ll be buying at a higher price?
Many thanks
your average cost will trend up, but your shares will also increase. the total shares on the market haven’t changed so your shares still hold the weight they should, you just wouldn’t have gotten them all as cheap as you could have.
however, if the shares are trending upwards then even though you raise your average cost by buying new shares, you receive greater gains because you now have more shares that are increasing in value.
in reverse, once the price starts decreasing you can average the cost down which can increase your potential profits down the line.
Thank you. I’m still developing my own strategy, learning all the time.