Buying at different prices

Hey guys, just a quick question.
Im a new here so please excuse the simple question.

Say i buy into a stock at £1 amd then after it gets to £2 i decide to buy more.
Im finding it difficult to put into words what i mean…

Say the stock price was £1 per share so i buy ten shares, then it raises to 2£ amd i decide to buy another ten shares, there are multiple stocks in the “wallet” but some were bought at a cheaper price etc.
How does that work out ?
I dont even know if im making sense lol its late.
Please be kind.
I may be able to re phrase this better but i wanted to ask anyway.

Morning @HushBasset

Your example it would look something like this

£1 x 10 = £1 average price

So the stock doubles and you buy more.

£2 x 10 = £1.50 new average price.

Your % will go from +100% to %50.

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Just as a follow up that nobody asked for about your average when selling. Shares use FIFO (first in first out) so if you sell the in the order you brought them, £1 shares first.

The stock doesn’t move for a bit so you decide to sell 5 shares. These 5 are for the initial £1 purchase but you sell them for £2 which is a £5 profit lovely!

You’re +- % goes from

Pre sale (20 shares) 50% profit
Post sale (15 shares) 75% profit

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Thank you for that. I didn’t realise that’s how it worked😁

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So does that mean that its best to not buy more stocks above the price that you first bought in at?
Sorry if im sounding like a complete Noob, but im still learning.

For some reason i thought that the app would remember each buy and then apply the earned money by the amount it went up from each seperate buy in.
Now i know a bit more about percentages etc ill hopefully be able to work it out myself (although i wont hold my breath) :wink:
Thanks again for the help :slight_smile:

If you look it will tell you the average share price of your purchases. Try to buy around or below that price if possible. If you want to compare the lowest price you paid per share, you can see on the individual buy order.

Really, whether you buy more or not should depend on whether you think it’s still a good investment, regardless of whether it’s higher or lower than it was before. I sometime add more at a higher price than my last investment because a stock is in an uptrend and is still a good investment.

Conversely a stock might be falling due to some kind of bad news and might be a worse investment, despite being “cheaper”

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Got some of those too😂

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You often see people on forums like this saying things like “I hope it drops more so I can buy more” or similar when they are in a losing position. That’s illogical. I want everything I’ve bought going up!

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I want the price per share of Apple, Google, Tesla, Amazon, Berkshire Hathaway, Unilever, J&J and some others to drop 60% tomorrow so I can buy some of it at bargain prices

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That’s fair enough if you don’t already own some. I’m talking about people who want shares they already own to go down so they can buy more. That doesn’t make sense

I think it does make sense and if you read Peter Lynch he will say things like “investors should be happy when a stock they believe in drops in share price because then they can buy more” as long as the story of why it’s an investment stays the same.

I.e. the fundamentals have not changed, but the share price has dropped.

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Guess I need to qualify that a bit, if the whole market has dropped it can be a great time to buy quality companies. Late Spring last year was a good example of a good buying opportunity. However I didn’t want that crash to happen, I was thousands of pounds in the red at the bottom.

What I’m really talking about are the threads where people are piling more and more cash into a falling penny stock, then trying to rationalise the loss by telling themselves and everyone else that they want it to carry on dropping so they can buy more. That is a great way to increase your risk and exposure to a bad investment. Many of these stocks will either keep on dropping an not recover for years, go bankrupt, or be forced to issue more shares to raise cash and dilute everyone into oblivion.

There is an opportunity cost to this. While you are trying to catch a falling knife and waiting for it to go back up a bit so you can at least break even you could be diversifying to increase your chances of picking a winner, or just buying successful profitable companies.

I have become a much more successful investor since I dropped the “Buy the dip” “Double Down” mentality towards losing positions

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Or the crowd, identified but their collective and distinctive delusional call “ it’s fine, it’s a long term hold for me”

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See the Sirius Metals thread for a great example. I did buy a small postion in that which turned out to be a loser, but I didn’t double down.

We even have some “you don’t lose until you sell” posts in there…

I did :grinning_face_with_smiling_eyes:. As long as you don’t need the money in the near future you want the share prices to stay as low as possible until you cash out so you can buy more.

The share price has little effect on the company fundamentals, I wouldn’t buy a company purely on share price movements. It doesn’t matter if it’s the whole market or the individual company that has dropped in value, for long term investing I would still value a company individually on it’s merits.