Editor’s Note: Since the advent of reality-show governance in Washington, uncertainty has been the only certainty. And if you think our politics is topsy-turvy, just take a look at Wall Street.

The CBOE Volatility Index (VIX), the market’s fear-o-meter, has been rising and currently hovers near 20, up from about 12 one year ago. This indicates that investors are increasingly stressed and they expect greater volatility in the near future.

Inflation is sticky, interest rates are elevated, jobs growth is losing momentum, and geopolitics is one social media post from combustion. In this jittery environment, some strategies thrive in chaos, especially the contrarian ones.

Below, I explore a rule that seems to break all the rules: buying more of a stock after it’s gone up. Heresy? Maybe. Profitable? Often. Allow me to explain.

The Madness of Averaging Up (and Why It Works)

We’ve all been there. You buy a stock. It goes up. You feel like a genius. So you do the logical thing… nothing. Or worse, you sell it to “lock in gains” and promptly watch it double again while you sulk into your lukewarm coffee.

Meanwhile, your losers? Oh, those you cradle like wounded pets. You average down because you believed in them…at $20, and then again at $10, and then at $5, because surely it’s “too cheap” to sell now. It’s not denial, it’s dollar-cost delusion.

The Pitfalls of Averaging Down

Averaging down sounds noble, even sensible. Buy more at a discount. Lower your cost basis. But here’s the rub: what if the market isn’t wrong, and you are?

Doubling down on a declining stock without understanding why it’s declining is a little like insisting your broken toaster will work again if you keep putting bread in it. Sometimes it’s not “undervalued.” Sometimes it’s just not working.

Read This Story: Four Meme Stocks Destined to Crash

Many investors fall into the psychological bear trap of not wanting to admit a mistake. Instead of taking the loss and reallocating capital into something that’s actually growing, they stay loyal to a narrative that the market abandoned six quarterly losses ago.

And even if the stock does recover, it might take years. Meanwhile, your money is tied up like it’s being held hostage by the Ghost of Earnings Past.

Flip the Script: Averaging Up Instead

Now here’s a wild idea: when a stock you own goes up… buy more. Yes, I said it. Buy more at a higher price. Revolutionary? Maybe. But let’s walk through the logic before you call the investing police.

Not every price increase is a mirage. Sometimes, a company actually earns its way to a higher valuation. Maybe it unveiled a game-changing product, landed a mega-deal, or ousted its CEO in favor of someone who doesn’t think EBITDA is a type of pasta.

When real improvements happen, a higher stock price may reflect a new reality, not irrational exuberance. If your original thesis is not only intact but now validated by results, averaging up isn’t buying high. It’s investing with conviction.

Of course, don’t throw cash at every stock that goes vertical. Plenty of rallies are powered more by Reddit than revenue. Always check that the fundamentals justify the price. But if they do? Don’t let your inner bargain hunter sabotage your portfolio.

Small-Cap Roulette: Where Averaging Up Shines

Nowhere is this principle more powerful (or more terrifying) than in the world of small-cap stocks. These are the startups of the public markets, i.e. unprofitable, unpolished, and possibly headquartered in someone’s garage.

Investing in these pint-sized powerhouses is high risk, high reward. Most will flame out faster than a politician-run crypto scam. But every so often, one of them actually builds something useful, gains traction, and begins to snowball.

When that happens, seize the moment. You were early. You were right. Don’t just pat yourself on the back and ride it out. If the company has crossed the Rubicon from “promising” to “profitable,” you’re now staring at a genuine growth story. That’s when averaging up isn’t chasing; it’s compounding.

Bet on Strength, Not Sympathy

Successful investing isn’t about sticking with your underperformers out of loyalty or nostalgia. It’s about identifying opportunity and grabbing it, even if it costs a little more the second time around.

So the next time you find yourself tempted to rescue a sinking stock just because it’s cheaper, ask yourself: “Would I buy this today if I didn’t already own it?”

If the answer is no, congratulations. You’ve just avoided the most expensive therapy session of your life.

And if your winner keeps winning? Don’t be afraid to ride the wave. Even if you’re buying at a new high, just remember: there’s no medal for getting the lowest price, only for getting the right outcome. In this market, that’s about as close to certainty as you’ll get.

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