Quote:
Originally Posted by Unregistered
for property, i'm staying out. but for stocks, i'm nibbling at blue chips, $10k at a time. if the stock i bought falls another 50%, another $10k will get me double the number of shares.
averaging down is generally a bad idea, but i'm targeting blue chips. these are companies with very good fundamentals and lots of cash.
moreover, as you said, with imperfect information, it's impossible to catch the bottom. maybe i have already bought at the bottom.
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The best instrument to effect this strategy, provided you really like the stock and are comfortable buying it over 1 year, is the accumulater (also dubbed "i kill u later" by disillusioned investors). It's a good instrument if applied selectively.
But personally, as long as the European debt crisis stays unresolved, I'd like to stay cash heavy. The effect of the Lehman crisis was a massive transfer of leverage from private sector to public sector (from govt bailing out their financial institutions).
The public debt saga we are seeing now has not fully played out yet. We've only seen nibbling at the edges of the problem ie central banks agreeing to support Italy and spain by buying their bonds. The fundamental problem of high debt to gdp, persistent deficits, has not been solved. And there is no simple answer, as Italy and Spain's economies are stagnant and there is little political will to raise taxes un a democracy.
So we are still operating in pretty choppy waters, and I'd be careful.