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average into a position

English translation: to reduce the average price for a position

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12:28 Jan 13, 2003
English to English translations [PRO]
Bus/Financial / Fund report
English term or phrase: average into a position
"Many risks still remain and investor scepticism towards the political will of Japan’s leadership may mean that it takes time for the market to recover to a significant degree. Still, we believe that this is an opportunity to average into positions, especially in many of the very good companies we follow and where we have confidence in underlying performance."
Johanna Holmberg
Local time: 13:46
English translation:to reduce the average price for a position
Explanation:
This is another way of proposing to "accumulate" certain issues - given the current low market levels, this will reduce the average price held.

An example:
Let's say that, six months ago, you believed Allianz shares were attractive at a price of EUR 175, so you bought 1,000 shares. When they started falling, you bought another 1,000 shares at EUR 165 - when they fell below EUR 100, you just closed your eyes...

So you're stuck with a position of 2,000 shares, at an average price of EUR 170. The share is currently trading at around EUR 95 - if you buy another 1,000 shares right now, you will reduce your average price to EUR 145.
Selected response from:

Ralf Lemster
Germany
Local time: 13:46
Grading comment
Thanks for an excellent explanation!
4 KudoZ points were awarded for this answer

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Summary of answers provided
5 +3to reduce the average price for a position
Ralf Lemster
4 +3see expl.wrtransco


  

Answers


13 mins   confidence: Answerer confidence 4/5Answerer confidence 4/5 peer agreement (net): +3
see expl.


Explanation:
HOW DOLLAR-COST AVERAGING WORKS
The object is to invest a set amount of money at regular intervals so the average cost of shares tends to even out the market's peaks and troughs. Your dollars purchase fewer shares when the market is up, but they buy more when it's down. While you may not achieve the positive results of buying at the market's low point and selling at its high point, neither will you suffer the consequences of doing the opposite. On average, in a generally rising market, you have the opportunity to accumulate wealth over time in a systematic, organized way.

position

The amount of a security either owned (a long position) or owed (a short position) by an investor or dealer.


Therefore, (in their oppinion)shares should be now bought at a lower price, before the market starts to go up.

wrtransco
Local time: 07:46
Native speaker of: Native in GermanGerman

Peer comments on this answer (and responses from the answerer)
agree  john mason
1 hr

agree  Peter Coles: A nice explanation of a deceptively complex idea.
2 hrs

agree  Nina Engberg
17 hrs
Login to enter a peer comment (or grade)

15 mins   confidence: Answerer confidence 5/5 peer agreement (net): +3
to reduce the average price for a position


Explanation:
This is another way of proposing to "accumulate" certain issues - given the current low market levels, this will reduce the average price held.

An example:
Let's say that, six months ago, you believed Allianz shares were attractive at a price of EUR 175, so you bought 1,000 shares. When they started falling, you bought another 1,000 shares at EUR 165 - when they fell below EUR 100, you just closed your eyes...

So you're stuck with a position of 2,000 shares, at an average price of EUR 170. The share is currently trading at around EUR 95 - if you buy another 1,000 shares right now, you will reduce your average price to EUR 145.

Ralf Lemster
Germany
Local time: 13:46
Native speaker of: German
PRO pts in pair: 377
Grading comment
Thanks for an excellent explanation!

Peer comments on this answer (and responses from the answerer)
agree  David Knowles
34 mins

agree  Peter Coles
2 hrs

agree  Nina Engberg
17 hrs
Login to enter a peer comment (or grade)




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