Move over, Bitcoin.
The most anticipated initial coin offering (ICO) ever begins auctioning later today.
Think IPO, only it’s a cryptocurrency — not a stock.
Although Wall Street has been tight-lipped about this historic event…
Readers of my premium publication — The Crypto Alert — have been enjoying ongoing coverage.
And later today, they’re anticipating a “magnitude 20” financial earthquake.
Here, I’ll give you a peek inside of The Crypto Alert.
Simply click on the redacted content to learn more.
Here’s the good news…
It’s not too late to join the ICO party!
I’m sending readers of The Crypto Alert implicit buying guidelines this afternoon, and I plan to provide daily coverage of this historic ICO beyond that.
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily
Good morning. This is Martin Hutchinson, senior analyst.
I’m building a library of all the concepts that you might need with investing.
Today, I’d like to talk about the average down strategy.
Under an average down strategy, you invest more in a stock if it declines substantially after your first investment is made.
Why would you do that?
First, it takes a decently contrarian approach to investing. In other words, you think that if it goes down, it must be a better value.
Second, if you’ve got a long time horizon and you take a value investment approach, then again you’re investing for value. You’re getting a better value by buying at a lower price.
Third, obviously it reduces the average cost of the investment.
There are, however, some negatives as well.
First, you may wind up with more of the stock than you want. If you keep averaging down, you’ll end up with larger and larger holdings.
Second — and the biggest danger of this strategy — is the market may know something you don’t.
Third, the shares could go on continuing downward. You find yourself getting larger and larger losses buying at ever cheaper prices. This is a huge trap psychologically because you always think you must’ve been right the first time.
The bottom line is this: Average down if you’re very confident and there’s no new news.
But never average down more than once on a stock if it fools you twice over a long period. Because almost certainly your initial rationale for buying it was probably all wrong. The quicker you recognize that the better.
This is Martin Hutchinson, signing off.
Senior Analyst, Wall Street Daily