When to Buy More

When to Buy More

Knowing when to add to your positions is just as important as knowing what to buy. There are several strategies for adding to existing holdings, each with its own merits.

Dollar-Cost Averaging (DCA)

Also known as "shilling-cost averaging" in Kenya, DCA means investing a fixed amount at regular intervals regardless of the share price. For example, investing KES 10,000 in Safaricom on the first Monday of every month.

• Advantage: You automatically buy more shares when prices are low and fewer when prices are high, lowering your average cost over time
• Advantage: Removes emotion from investing. You do not need to guess whether the market is going up or down
• Best for: Most investors, especially beginners who invest from their monthly salary

Buying on Dips

Some investors prefer to wait for price drops before buying. If a quality stock you already own drops 10-15% without any change in its fundamental business, it could be an opportunity to buy more at a lower price.

However, be careful to distinguish between a temporary dip and a genuine decline in the company's prospects. A falling price is only a bargain if the company's fundamentals remain strong.

Averaging Down vs Averaging Up

• Averaging down — Buying more of a stock that has fallen in price. This can be smart if the company is still fundamentally sound, but dangerous if the stock is falling for good reasons.
• Averaging up — Buying more of a stock that has risen. This confirms the market agrees with your thesis and can be a powerful strategy for riding winners.

For most investors, DCA is the simplest and most reliable approach. Set up a regular investment schedule and stick to it through good times and bad.