Buying : Leave Room to Average Down
Seth Klarman:
“…The single most crucial factor in trading is developing the appropriate reaction to price fluctuations…One half of trading involves learning how to buy. In my view, investors should usually refrain from purchasing a “full position” (the maximum dollar commitment they intend to make) in a given security all at once…Buying a partial position leaves reserves that permit investors to “average down,” lowering their average cost per share, if prices decline…If the security you are considering is truly a good investment, not a speculation, you would certainly want to own more at lower prices. If, prior to purchase, you realize that you are unwilling to average down, then you probably should not make the purchase in the first place…”
