Averaging up

[Cod Liver Oil]

I noticed I have been averaging up with existing positions over the last few years rather than starting new investments (i.e. GOOG, Nintendo, Coupang, Bollore, perhaps Sony).

Maybe this is sunk cost bias.  It def. leads to increasing concentration. Is anyone else suffering or benefitting from this disability? 

Edited February 5 by Cod Liver Oil

[73 Reds]

9 minutes ago, Cod Liver Oil said:

I noticed I have been averaging up with existing positions over the last few years rather than starting new investments (i.e. GOOG, Nintendo, Coupang, Bollore, perhaps Sony).

Maybe this is sunk cost bias.  It def. leads to increasing concentration. Is anyone else suffering or benefitting from this disability? 

Only for the last 30 years.  Buy what you know.

[Charlie]

8 minutes ago, 73 Reds said:

Only for the last 30 years.  Buy what you know.

me too.  

 

Bill Gates and Warren Buffett said independently that the most important ingredient for success is: Focus.

 

It´s a good idea to focus on the flowers you know best.

 

Too much of a very good thing can be wonderful.

[Gregmal]

Averaging up is inevitable if you’re a half decent investor. It means your shit is working…

[Milu]

44 minutes ago, Cod Liver Oil said:

I noticed I have been averaging up with existing positions over the last few years rather than starting new investments (i.e. GOOG, Nintendo, Coupang, Bollore, perhaps Sony).

Maybe this is sunk cost bias.  It def. leads to increasing concentration. Is anyone else suffering or benefitting from this disability? 

I have a bit of a mental block with averaging up, improving gradually though, but don't have any issue riding my winners to ever and ever higher levels of concentration, so I get to the same end point as you. Top 4 positions are around 60-70% of portfolio.

[Valuebo]

Can't have been too much averaging up in Coupang lately, ha!

 

But yes, as Greg said, it's a sign your shit is working. I'm trying to learn to average up more than down. It prevents blowing up sizeable portions of your portfolio at least.

[Marco Van Basten]

1 hour ago, Cod Liver Oil said:

I noticed I have been averaging up with existing positions over the last few years rather than starting new investments (i.e. GOOG, Nintendo, Coupang, Bollore, perhaps Sony).

Maybe this is sunk cost bias.  It def. leads to increasing concentration. Is anyone else suffering or benefitting from this disability? 

I have done it a couple of times, it is very hard to do psychologically.  

[Red Lion]

I’ve found that averaging up works much better than averaging down for me, but it’s still counter intuitive. 
 

 

[73 Reds]

4 minutes ago, Marco Van Basten said:

I have done it a couple of times, it is very hard to do psychologically.  

Why?  Just consider Fairfax Financial, a company near and dear to many of us.  Have been consistently averaging up for at least 5 years and no plans to stop now as long as it remains cheap.

[thepupil]

averaging up makes complete sense. fundamentals go up (hopefully) therefore price goes up. market (and a lot of stocks) are almost always w/i a few % of ATH so if one didn't average up, one risks being left behind. i struggle w/ paying a higher price relative to fundamentals than i did in the past, but have no issue paying a higher nominal price. 

 

also more information is revealed with time. 

 

 

[Rod]

I always designate the maximum % I want to own at the beginning and buy that much. Afterwards I never average up or down, except for reinvesting dividends. Keeps things simple. I also believe it respects the two basic principles of diversification: make multiple bets and keep them separate. Adding money to existing investments that were originally "maxed" violates the second principle.

[Saluki]

It can be worth it if the results are improving. NTDOY had a lot of uncertainty when it was $10. After the new Switch (which Nintendo denied existed) was released, and it broke sales records, then buying it higher is actually better risk/reward. 

 

Coupang at the price it was when it went into Taiwan was risky, it's worth more after Taiwan worked out. (could've been another Japan). 

 

It's tough for me also because of anchoring and position sizing. GOOG is my largest position now because I've been sitting on my hands. But it's more risky now because the outcome isn't dependent on the DOJ lawsuit, but it's on whether the $180bln in capex for AI will be worth it. Even if you are a computer scientist and know a lot about AI, which I am not, it would be hard to say with confidence that the outcome is certain to be in Google's favor. 

 

Look at MU now. Is it worth that multiple now, when people were passing on it when the multiple was single digits? I don't know. But the stuff you already own is very familiar and easier to judge because you know it and have seen it perform over time. 

[Milu]

17 minutes ago, thepupil said:

averaging up makes complete sense. fundamentals go up (hopefully) therefore price goes up. market (and a lot of stocks) are almost always w/i a few % of ATH so if one didn't average up, one risks being left behind. i struggle w/ paying a higher price relative to fundamentals than i did in the past, but have no issue paying a higher nominal price. 

 

also more information is revealed with time. 

 

 

Yes I'm the same, I don't average up in multiple I'm willing to pay but have no issue buying a stock that I already own that has doubled, if the underlying earning power of the business has doubled. I don't really see that as averaging up in my head, but perhaps others do. To me averaging up would be if I bought a stock I liked at 15 times earnings, and then it went to 20 and 25 times earnings, I wouldn't be confident averaging up if I felt the earning power of the business stayed the same and all that changed was the multiple people wanted to pay for that went up.

[Marco Van Basten]

26 minutes ago, 73 Reds said:

Why?  Just consider Fairfax Financial, a company near and dear to many of us.  Have been consistently averaging up for at least 5 years and no plans to stop now as long as it remains cheap.

You are right but you are assuming human beings are 100% rational.  I have not yet met one who is always 100% rational.  I fight my anchoring bias regularly, but it is hard for me to pay $5 for something that I paid $3 previously, although logically I agree with you, and as I said, I have done it twice.  

[Masterofnone]

It is hard to imagine that over a say, 40 year span of investing that one wouldn't average up. Once purchased, are companies disqualified from ever again being good investments? Once you get used to it in the long term, it becomes easier to do in the shorter term.

[gfp]

I think the only time I actually "averaged down" on Berkshire was the markets reopening after 9/11.  I wouldn't have ever owned very much Berkshire if not for averaging up

[Libs]

I'll bet a lot of us have averaged up on BRK over the years. I sure have.

[DooDiligence]

I've been averaging up on Novo Nordisk while simultaneously averaging down.

[UK]

5+ years ago I used not to do this and it was a big mistake. 

 

Averaged up FFH from 600+ CAD in 2022 to 1200+ CAD in 2024 into ~40 position (peak add was thanks to MW), trading ~10 per cent around ~30 core position since.

 

Recently, after Gemini 3 come out, I averaged up some GOOGL, despite missing most of 2025 gains (still not that big of a position).

 

Focusing not on price, but on valuation/fundamentals helps (PE or PBV charts is much better).

 

Reading or listening what Druckenmiller/Soros has to say on the subject helps (basically, if price is going up, after you did your work and bought, it is likely only confirms you are right as market agrees, so risk you thesis is wrong decreases and you can add more:)).

 

For Soros, adding to a position after a price increase isn't just momentum trading; it's a strategic move designed to capitalize on a positive feedback loop where the market’s perception of a company, expressed through its share price, becomes its reality. 

 

Edited February 6 by UK

[Ver]

Buying and selling have nothing to do your original purchase price, nor do any past decisions affect your actions now. All that matters is the valuation and the discounted cash flows it will make in the future.  These confusions arise because people try to invest where they don't know how much cash it will make and try to cope with that uncertainty in ineffective ways.

 

If it's helpful, just think of it as a VC funding round. No VC is going to say 'well I invested in their Series A but not the series D because I'm nervous about averaging up.' Their discrete nature seems to make it easier to think rationally. 

[SharperDingaan]

One needs to be strategic; averaging up to the desired quantity via a series of purchases is little different to agile project management. No addition (at a higher purchase price) until the company delivers at each new stage.

 

SD

[LC]

Not sure if I call it "averaging up" so much as I try to buy whatever I think is best value at the moment.

So yes in companies like Fairfax and Nintendo I've definitely bought recently at prices higher than 3 years ago. In companies like Coupang and Exor I've averaged down!

 

But I don't really sell too often so many times these things sit in my portfolio for a while, inevitably if I buy more a few years later it's going to be at a higher price.