Let's say you bought in JKH for a specific price. The price was stabilized and it was not volatile. You put your whole money in to it e.g 1 million.
The share plummets and the stock is trading half of the price now. Maybe you had bought it when it was over valued.
For you to average it, you need to pump in 1:1.5 times of your initial investment to get it close to the trading price.
Not many can afford to put another 1.5 million to the same jockey! and once you witness such a dip, its like a snake bite! You don't want to risk again. so you either keep it and forget about it like an ostrich investor or you take the hit and make sure you invest in something solid to cover your losses, or maybe never come again! unfortunately.
Billionaires can afford to. They can even get a quick bank loan or overdraft to make such position. You and I can't buddy! Unless you're a billionaire!
Been in this for more than a decade, I've seen alot!
I have seen this happening alot. When we invest in stock market (I emphasize Invest not blind buying & selling) there are certain good practices we need to follow and not putting all your eggs in one basket is one of them.
I have learnt this lesson in the hard way during the 2009-2010 time period where all the stocks were surging and i had put all my money on Greg walker when the share was at it's peak (manipulated or not i don't know)
In a scenario where as you mentioned a guy puts all his money on a share like JKH which is fundamentally strong and assets wise 2nd to none, you don't expect to make a massive gain in 2-3 months but you invest in it in the long run. If you invest in the long run and if you believe in the share that you bought, forget about the market fluctuation because your intentions were to make a capital gain in the long run. So trust in your self and the judgement you made to buy the share and wait for it to go where you intend it to go.
If you are a trader not an investor and you are not in it in the long run, well then like i said dont put all your money in one horse and keep something in the pocket as well. cos true traders know when to go for the kill. its something that you need to practice over a period of time. (don't get me wrong I am not a pro at all) Just my two cents