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Reader says...
... Singtel, average down from entry at $3.62 till $3.33, average cost is about 3.44.
I only started buying stock about 6 months ago, and having using this approach.
I decided an entry price, normally at 52 weeks low so I got a margin of safety, then average down if the stock keep dropping and stop when the stock moving up.
What is your opinion of this average down approach?
One down side I learnt so far is if the stock run up after my entry price, then I will not be able to accumulate much as only nibble small amount (3k-4k) at the start.
It happened with my ST Engineering, Sheng Siong and First Reit.
The stock took off after my entry and have no chance to buy since then as I tried to chase.
Also, what do you think about stock with low transaction volume?
Should we avoid those as it might not be easy to sell with low daily volume ?
If the price on a good investment goes lower, it is better value. ;)
As for less liquid counters, I don't see a problem if we are investing for income. :)
See what a CFA and investment guru told me about Old Chang Kee when I blogged about investing in it in 2011?
"I love eating Old Chang Kee. However, the stock is quite illiquid and has very little volume. One look at the bid ask spread tells me a lot about the counter.
"So as much as I love Old Chang Kee, it is somewhat considered close to a penny stock to me. Therefore I can't invest in it."
See full comment and also my reply in the comments section of:
http://singaporeanstocksinvestor.blogspot.sg/2011/10/old-chang-kee-initiated-long-position.html
Have a plan.
Everything remaining equal, stick to the plan.
Ignore the noise. :)
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