How to Buy Shares at Lower Prices and Average Your Costs Down (The Smart Way)

One of the biggest challenges investors face is buying shares at high prices and watching them fall. The good news is that this doesn’t have to end in losses. With the right strategy, you can buy shares at lower prices, reduce your average cost, and position yourself for profits when prices recover.

This guide explains how to do it the right way.

Step 1: Start With Your Portfolio Valuation

Before buying any new shares, always review your portfolio valuation.

Identify the shares with the highest unrealized losses
These are stocks whose prices have dropped significantly from your buying price

A large loss often means the stock is now trading at a much lower price — this is where averaging down becomes relevant, but only if done correctly.

Step 2: Ask the Most Important Question

Is the stock a dividend payer?

This single question determines your next move.

When Averaging Down Makes Sense: Dividend Stocks

If the stock pays dividends, a price drop can actually work in your favor.

Buying at a lower price reduces your average cost
Your dividend yield increases
You get paid while waiting for price recovery

Strategy:

Buy additional shares after prices dip
Focus on fundamentally strong dividend-paying companies
Hold the stock unless profits become exceptionally high

When prices recover, you move into a profit position faster because your average entry price is now lower.

Non-Dividend Stocks: Average Down With Caution

Non-dividend stocks require a strict exit plan.

Since these stocks do not pay you while you wait, prices can continue adjusting downward and tie up your capital.

How to handle them:

Average down only to reduce your cost
Once the price rebounds and you return to profit, sell immediately
Do not convert short-term recovery trades into long-term holdings

For non-dividend stocks, averaging down is a recovery strategy, not a long-term investment strategy.

Step 3: Use Market Depth to Buy at Lower Prices

Buying at the right price is just as important as choosing the right stock. Always check market depth before placing an order.

What to look for:

Areas with strong buying pressure
Price levels with large buy orders

Execution strategy:

If buying pressure is at the bottom, place your order at the lower price or slightly above the strongest buying level
If buying pressure is at the top, buy at the current selling price or use a GTD (Good-Till-Date) order

GTD orders allow you to take advantage of lower prices without chasing the market.