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Averaging down buys more at a lower price, pulling the weighted average cost down. It reduces the recovery needed to break even, but it also increases the position in a falling holding — which is why it requires conviction in the underlying, not just the price.
Weighted average cost
Average = (q₁p₁ + q₂p₂) / (q₁ + q₂)
Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
Only if the original thesis still holds. Adding to a broken position is how small losses become large ones.
A SIP averages mechanically across a whole market. Averaging down is a discretionary bet on one holding.