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Asset managers often increase holdings in successful stocks right before the end of the fiscal quarter to make it appear as though their positions did better than in actuality. Holding shares of a company near the end of the quarter gives the appearance that the asset manager reaped the gains of an appreciating share price throughout the entire quarter rather than just a few days. This also applies to decreasing holdings in unsuccessful stocks as well.

A sudden downturn in price after entering a position may discourage many investors. However, it can be beneficial to double down by increasing your position, thereby “averaging down.” An example: a trader buys stock in a company at $100 a share. The share price declines to $80 a share. If the trader is still bullish on the stock, they can double their position while decreasing their average purchase price to $90 a share.

Often, traders may have uncertainty or pessimism regarding a particular trade or investment position. If you are “in doubt,” it is sometimes best to “get out” of your investment. By selling off or reducing your position, you are limiting your risk and sidestepping potential losses.