Stock average calculator
This stock average calculator works out the weighted average cost of several purchases. Example: 100 shares at 50, 100 at 40 and 50 at 36 give 43.20 on 250 shares and 10,800 invested.
Source: Wikipedia – Weighted arithmetic mean. Updated: .
How it is calculated
The average cost (average purchase price) is the weighted mean of all purchase prices in a position. If you buy a stock, an ETF or a cryptocurrency in several tranches, you get a single cost basis per share.
Formula
Average cost = sum of (shares × price) ÷ sum of shares. The weighting uses the number of shares because larger purchases count for more than small ones. A simple average of the prices would only be right if all purchases had the same size.
Example
Purchase 1: 100 × 50 = 5,000. Purchase 2: 100 × 40 = 4,000. Purchase 3: 50 × 36 = 1,800. Total invested 10,800 for 250 shares, so 10,800 ÷ 250 = 43.20. With only the first two purchases (equal size) it would be the simple mean 45.00.
- Fees and taxes are not included; they would raise the cost basis.
- The average cost is a backward-looking figure and says nothing about future prices.
Frequently asked questions
How do you calculate the average cost of several purchases?
Add up all amounts (shares × price) and divide by the total number of shares. In the example 10,800 ÷ 250 = 43.20.
Why is a simple average of the prices not enough?
Because the purchase sizes differ. The simple mean of 50, 40 and 36 would be 42.00, the weighted value 43.20.
What is the cost basis per share?
It is another name for the average cost: the mean purchase price per share, from which the calculated gain or loss against the current price follows.
Sources and legal basis
- Wikipedia – Weighted arithmetic mean
- Wikipedia – Cost basis (average cost method)
- Bodie, Kane, Marcus: Investments – Returns and portfolio basics
As of: · Editorial policy
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