Dick's Blog

Is Averaging Profitable?

DickyMe3
Publish date: Wed, 08 Jun 2022, 06:25 PM
NO
Price (RM)
Share Unit(s)
Cost (RM)
Dividend %
Dividend (RM)
End Value (RM)
1
1.000
1000
1000
0.05
50
950.00
2
0.950
2000
1950
0.05
100
1850.00
3
0.900
3000
2850
0.05
150
2700.00
4
0.850
4000
3700
0.05
200
3500.00
5
0.800
5000
4500
0.05
250
4250.00
6
0.750
6000
5250
0.05
300
4950.00
7
0.700
7000
5950
0.05
350
5600.00
8
0.650
8000
6600
0.05
400
6200.00
9
0.600
9000
7200
0.05
450
6750.00
10
0.550
10000
7750
0.05
500
7250.00
11
0.500
11000
8250
0.05
550
7700.00
12
0.450
12000
8700
0.05
600
8100.00
13
0.400
13000
9100
0.05
650
8450.00
14
0.350
14000
9450
0.05
700
8750.00
15
0.300
15000
9750
0.05
750
9000.00
16
0.250
16000
10000
0.05
800
9200.00
17
0.200
17000
10200
0.05
850
9350.00
18
0.150
18000
10350
0.05
900
9450.00
19
0.100
19000
10450
0.05
950
9500.00
20
0.050
20000
10500
0.05
1000
9500.00
21
0.005
21000
10505
0.05
1050
9455.00


When a stock's price steadily slides from "penthouse" price to PN17 or penny level, that is 0.005 sen, we often read comments by some so called experts in investing or so called long term investors that they are averaging and stand to gain more. Is this true? Let's find out from an hypothetical transaction of a stock made by a CAT.


ASSUMPTIONS.

Initial purchase was done at RM1.00 for 1000 units.

Subsequent purchases are made at every dip of 5 sen and the quantity purchased is a constant 1000 units.

A constant 5 sen dividend is paid, quarterly.

​Cost is shown as running total.

End value is cost minus dividend.
============================

Although the price is sliding down, our long term investor with balls/tits of steel continue to put a brave front and buys.

It takes 21 transactions with 5 sen erosion to reach a pitiful price of 0.005 sen.

Well, I don't know how this fictitious company could continue pay dividend when it's market capitalisation is eroding. but the argument is they keep for loooooooooooooong term and dividend.

The only positive outcome is, our expert now has a huge quantity of "toilet papers" and keeps praying for a miraculous spike or "intervention aka bailout" wink* wink*


​

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Be the first to like this. Showing 2 of 2 comments

brianklc

Halo, pls study how profit and dividend works! Ur table above only applies if there are no profit hence any dividend paid is CAPITAL REPAYMENT! U need go back to school!

2022-09-19 08:53

Sslee

Need to ask Philip.
He average down Pchem and it work for him.
Now he average down Harta.

2022-09-19 09:32

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