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  • Adib Motiwala commented on The Science of Hitting's article 9 hr ago
    Confidence and Concentration Risk
    In a recent article, “Shortcomings in My Investment Process” (here), I mentioned something that’s inherent / ingrained in my way of thinking...
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    Adib Motiwala 11-29 21:38
    • excellent and though provoking article ( as can be seen by the many comments).

      I think 5% drop is too little to add unless you are adding really tiny increments. I think larger drops of ~20% or so may be worth while. Also depends on initial position as batbeer said. If initial position is sized ok then maybe you wait for a bigger drop. 

      Coming to the point, usually when stocks go down 20%-30%, there is usually something going on (unless its just a general market down trend like seen in Aug sept 2015). In some cases, it is not clear if adding to the position is the best course. Some times it makes sense to trim, sometimes do nothing. Sometimes averaging down means digging a deeper hole and I am not sure if just averaging down constantly is the way to go. Some one wisely said, each case is different. 

      I also have noticed from my personal investments this year that often one tends to use last 2-3 year price ranges and think the low ends are sort of the max a stock could go down as the company has added value over the years. However, when things start to break down , socks could hit multi year lows as seen by WMT. It is good to be humble and accept that we may get a few of these contrarian ones wrong. Mr Market is not wrong too often.






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