Mundy: Why some equity investors should just cut their losses

EQUITIES

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The term ‘averaging down' explains the process of buying more shares of a company following a purchase at a higher price.

A few minutes on the internet will uncover some evangelical souls who clearly believe this leads to great riches — and just as many claiming such actions provide a quick route to the poorhouse. The first group typically has one or two examples of superb stockpicks they feel proves the success of the approach, while the second simply highlights one or two choice falling knives. I have always believed value investors who crash and burn typically do so not because of their dogmatic belief in the philosophy of their approach, but because of its implementation. They tend to obsess about...

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