™Ten shares at $100 plus ten at $80 lower average cost to $90, but increase invested capital from $1,000 to $1,800.
Trading
Averaging down
Buying more after a price decline, which lowers average cost but increases exposure and risk.
Plain-English context
Put the definition to work.
Reducing average cost increases committed exposure; it does not improve the issuer's prospects or erase the original loss.
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