What is cost averaging in stocks?+
Cost averaging (or rupee cost averaging in SIP context) means buying more shares at different prices so your average purchase price is lower than the peak. Example: Buy 100 shares at ₹500 = ₹50,000. Buy 100 more at ₹400 = ₹40,000. Average cost = ₹90,000/200 = ₹450/share. You now break even when the stock recovers to ₹450 instead of ₹500.
Should I average down on a falling stock?+
Averaging down is only sensible if you have conviction that the business fundamentals are intact and the price fall is temporary due to market sentiment rather than business deterioration. Never average down on a stock where the business itself is struggling — you risk catching a falling knife. Always assess why the stock fell before buying more.