Stock Market Lesson (Stock Averaging)

Stock Averaging

You buy 10 stocks for 100 Rs on Day 1. 
Price of stock is 10 Rs.
10 Days later lets say, stock price comes down to 8 INR and you buy 10 more stocks. 
The price of stock today is 8 Rs.
Total number of shares with you is 20.
For a price of: (10 + 8) * 10
Then average 'Stock Price' for your stock for you is: 9 Rs

Now, let's us, you buy 10 stocks for 100 Rs. For Rs 10 per share.
10 days later, stock price rises to 15 INR. You buy 10 more shares for Rs 15 per share.
Total number of shares with is now 20.
Then average 'Stock Price' for your stock is: 12.5 INR 

% If your stock is going up, you have to keep averaging it. 

% Always average your Winners. Never average your Losers. 

Other Tips

% When markets are volatile, it is hard to detect individual good or bad stocks.

% When markets are going up, it is easier to go up with the tide but it is hard to justify why a particular low-profile stock has gone up or gone down.

% You should always compare your stock with market benchmarks such as Nifty50 and Sensex.

% Good stocks shoot up like anything when the market benchmarks are going up by like 1% (which is considered a high fluctuation for Nifty50 and Sensex).

Tags: Investment,