benson If you bought 10 shares for a quid and the price dropped to 50p a share, and you bought another 20 shares for 50p each, your average price would be 67p so instead of the stock having to go back up 50p, it only needs to go up 17p to break even.
Cost averaging is a foundational investing technique that has worked since stock trading began. The only way it won’t work is if you invest your money in companies that won’t go back up 17p a share (which begs the question did you do your due diligence before you invested in said company).
The downside of course is that more of your capital is tied up so there’s always the theoretical cost of missing out on some bargain elsewhere but that’s the chance you take it you don’t want to lose your money.
