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Average Cost Formula:
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Dollar cost averaging is an investment strategy where an investor divides up the total amount to be invested across periodic purchases of a target asset to reduce the impact of volatility on the overall purchase. The average cost is calculated by dividing the total amount invested by the total number of shares acquired.
The calculator uses the average cost formula:
Where:
Explanation: This simple division gives you the average price you've paid per share across all your purchases, which is particularly useful when using dollar cost averaging strategy.
Details: Calculating your average cost helps you understand your true investment basis, track performance against current market prices, make informed decisions about when to buy more or sell, and evaluate the effectiveness of your dollar cost averaging strategy.
Tips: Enter the total amount you've invested in dollars and the total number of shares you've acquired. Both values must be positive numbers. The calculator will compute your average cost per share.
Q1: What is dollar cost averaging?
A: Dollar cost averaging is investing a fixed amount of money at regular intervals, regardless of the share price. This strategy reduces the impact of market volatility.
Q2: Why calculate average cost?
A: Knowing your average cost helps you determine your break-even point, assess investment performance, and make informed buying/selling decisions.
Q3: How often should I calculate my average cost?
A: It's good practice to recalculate after each investment purchase to keep track of your changing cost basis.
Q4: Does this include brokerage fees?
A: For accurate average cost calculation, your total invested amount should include all commissions and fees paid.
Q5: Can I use this for multiple stocks?
A: This calculator is designed for a single stock. For multiple stocks, you would need to calculate average cost separately for each position.