Eli5: with stocks going down why would someone hold and buy more on the way down (average down) and not just sell now and buy again when the stock bottoms out?
In: Mathematics
Depends on a a few different factors such as taxes, cash flow, and the price point that they had originally bought in at. For instance if you began buying a stock when it was at say $10 a share and now have 100 shares with your most recently purchased 10 shares were purchased at $150 but the stock has since dropped to $100 it’s in your best interest to simply hold and expand your position if you believe in the stock and know it’ll go back up rather than sell all 100 shares, be taxed, and then still have to buy back in at a much higher price point than the $10 you had initially bought in.
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