This article is of the opinion of the writer and not intended as financial advice. If you require qualified finance advice see your bank manager, financial advisor, or budget advisor.
The Sharemarket-Averaging
Averaging in the sharemarket is when you purchase shares in a company and as the share price declines you purchase more shares in the company therefore reducing the average price paid per share.
Here is an example of how averaging would work.
Price Number amount Price per share Total average
$4.00 1000 $4000 $4.00 $4000 $4.00
$3.50 1000 $3500 $3.75 $7500 $3.75
$3.00 1000 $3000 $3.50 $10500 $3.50
$2.50 1000 $2500 $3.25 $13000 $3.25
$2.00 1000 $2000 $3.00 $15000 $3.00
In this example you began by purchasing 1000 shares at $4 per share but in a sliding market where the price in this companies shares have continued to slide, if you buy this company’s stock as it’s share price continues to fall, the average price you will have paid per stock will be reduced. This is called averaging.
This kind of strategy can be used in the cryptocurrency market but it should be pointed out that only money which you can afford to lose should be risked in Bitcoin.
Investing in gold or other precious metals is another form of capital gains which can form part of your wealth-building strategy, you can find more about it here: