What is Averaging ?

Averaging Buying a share at different times, in different quantities. And at different prices, so that an advantageous average price is obtained. For example, someone has bought 100 shares at Rs 80 in a rising market; when the price falls to Rs 60 he may buy another 200. By averaging he has obtained a price of Rs. 66.33 for a share. If he buys still further shares when the price is lower, by averaging he may obtain an even lower price. Averaging is often done to offset the high price once paid in a rising market. Also, averaging is a means of not paying too high a price when buying a lot of shares (there is no violent change in price, since the buying is in small lots), or not getting too low a price when selling a large chunk of shares (the price doesn’t drop suddenly).

 

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