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Chris Perruna: Averaging down can lead to value traps for investors

Chris Perruna: Averaging down can lead to value traps for investors
Averaging down often a value trap

Chris Perruna highlights the risks of averaging down when investing. According to Perruna, while lowering a position’s cost basis may seem appealing, traders are actually putting more money into losing trades. He urges that every dollar spent defending a bad position is a dollar not available for better opportunities.

The commentary serves as a caution to investors considering averaging down in hopes of recouping losses.

Perruna previously argued that investors should add to rising stock positions and avoid averaging down on losing trades. He has also questioned whether the 82 percent decline in Duolingo shares from previous highs signals limits on growth or a broader reset. The analyst has maintained a cautious stance on defending losing positions.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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