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Average Cost Formula:
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The average cost of a stock represents the mean price paid per share when multiple purchases are made at different prices. It helps investors track their investment performance and make informed decisions about buying or selling.
The calculator uses the simple average cost formula:
Where:
Explanation: This calculation gives you the weighted average price per share based on your total investment and total shares owned.
Details: Knowing your average cost per share is essential for determining your break-even point, calculating potential profits or losses, and making strategic investment decisions about when to buy more shares or sell existing holdings.
Tips: Enter the total amount of money invested in dollars and the total number of shares acquired. Both values must be positive numbers, with total shares greater than zero.
Q1: Why is average cost important for investors?
A: It helps investors understand their true cost basis per share, which is crucial for calculating capital gains/losses and making informed trading decisions.
Q2: How does average cost differ from current market price?
A: Average cost reflects what you've paid historically, while market price shows what the stock is worth currently. The difference determines your paper profit or loss.
Q3: Should I include brokerage fees in total cost?
A: Yes, for accurate average cost calculation, include all acquisition costs such as brokerage commissions and fees in your total cost.
Q4: What if I bought shares at different prices?
A: The calculator automatically accounts for multiple purchases at different prices by using the total cost and total shares, giving you a weighted average.
Q5: How often should I recalculate my average cost?
A: Recalculate after each purchase to maintain an accurate understanding of your investment position and cost basis.