Tuesday 6 September 2016

Averaging Down (aka, after I buy, the price always drop)



HSBC is an example of my average down technique. After I buy something, the price drops and I average down. As long as price is below my average buying price, I keep on buying  :s13:

Jan: US$33.28 My very first purchase of HSBC.
Feb: US$31.85 Ok, price drop, just average down.
Feb: US$31.59
Feb: US$31.40
Mar: Too sian, stopped buying HSBC, buy other counters
Apr: US$30.59  HSBC dropped 8% from my Jan buy price! 
Apr: US$29.80  Still dropping? Ok lah, just throw some more money at it. One day will go up above $30. 
May: No purchases.
Jun: US$30.29
Jun: US$29.74  Wah, cannot hold, ok just buy under $30 again, sure go above $30 soon!
Jul: stopped buying once price went above my average buying price
Aug: same

Current price:  US$38.33 + US$0.50 ex-Div in August
Average purchase price: $31.05
% Return including dividend: 25%

My weakness is I don't know how to average up. I look at the HSBC price now and I got no interest in buying more. For upward market, I only know how to DCA and buy ETF regularly. 

Furthermore, in upward market, I will not allocate all to equities. Some of the monthly DCA should be normally allocated to bonds/cash/others as part of asset allocation. However, I would like a little bit more clarity on rate hikes before getting more bonds at this point, because market seems to be pricing in no rate hike, which means that if there is a hike, bonds will drop. 

I prefer to buy after a crash.

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