QUOTE(cherroy @ May 6 2011, 10:05 PM)
First of all, I am not familiar with Amedia.
But for me, averaging down or up is just your mind playing on your own only.
First buy 0.30
Second buy 0.20
Some said you average cost is 0.25.
some said sell at 0.25 then breakeven.
To me,
First buy and second buy are independent to each other.
Sell at 0.25, means 0.20 make 0.05, and 0.30 make a loss of 0.05.
So total breakeven.
It is same you bought A stock at 0.30 at 0.30,
then go to buy B stock at 0.20.
Little difference, the difference is you are at 2 front of price movement instead of 1.
If A and B stock also 0.25, you also breakeven.
What important is your total fund/total portfolio is making money or not.
My 2 cents.
To add
First buy 0.30
price plunge to 0.20.
You only make a decision to buy because you ses price can move up from 0.20. This should be the sole reason why you want to buy at 0.20
Please do not buy just because you want to average down your cost to 0.25.
It doesn't work this way. Your 0.30 is done deal, you cannot bring down the cost of 0.30.
I think I have a diff opinion on DCA, though not specific to Amedia :-
Under the Asset Allocation model , the neutral point is 50% cash and 50% share.
1) If share price is towards more undervalued , then reduce the cash balance and buy more shares
2) If share price is towards overvalued , then reduce the shareholding level, and keep more cash.
It is just one of the simplified versions, and some in the West are using computers to generate a more complex fund.
As the share price moves, the risk level changes ( assuming company performance is on target ).
As I say, one has to be comfortable with, and with some understanding. Pre set levels could be fine tuned to own comfort or age level.
I see some logic to it when I learn it through a seminar.
May not applicable to others.
http://www.investopedia.com/terms/a/assetallocation.asphttp://en.wikipedia.org/wiki/Asset_allocationhttp://www.sec.gov/investor/pubs/assetallocation.htmThis post has been edited by SKY 1809: May 7 2011, 09:07 AM