The art of averaging
Averaging is a term that can be found in markets from time to time; this refers to the average price paid for a particular share if you purchased shares in that particular company.
To calculate the average price paid for a particular share, you add up the total amount you paid for the shares and divide it by the number of shares you bought in that company.
The answer is the average amount you paid per share.
Try this math question:
There are five numbers 10, 20, 30, 40, 50
What is the average number?
The calculation:
Add the five numbers: 10 + 20 + 30 + 40 + 50 = 150
Divide the total of the five numbers (150) by 5
150 divided by 5 = 30 (answer)
You can do this easily with a calculator.
There are so many stock trading platforms these days that investing directly in the stock market has never been easier for ordinary men and women.
So how does averaging work?
If you buy stocks at regular intervals, you will pay different prices for each stock as stock prices go up and down. Imagine if you bought something at the supermarket last week at full price, then you bought the same item this week at a special price. The average price you paid for the item will be somewhere between the higher and lower price.
The stock market works like this. By buying a certain share at regular intervals you will be able to take some shares in it when the price is lower. This is the advantage of regular savings.
In fact, I think it makes sense to buy more shares when the price is low. The average price paid per share is determined by calculations, as explained above.
The averaging strategy can also be used when investing in cryptocurrency.
Bitcoin is more volatile than the stock market, so an astute investor who has an eye for a bargain can invest when the price falls.
There are so many stock trading platforms available that the game in the markets is accessible to everyone. I joined two of them in New Zealand. Most countries have stock trading platforms available. Registering for them is easy; you need some form of identification. Just follow the instructions and you’re done.
TO SUMMARIZE
The game of markets requires positive thinking and a cool head. If you have them, you can profit from falling markets. Averaging is a method that takes advantage of falling markets.