Average cost formula
Average price = Σ (Shares × Price) ÷ Σ Shares
Shares to reach target = (Total cost − Target × Shares) ÷ (Target − New price)
Shares to reach target = (Total cost − Target × Shares) ÷ (Target − New price)
Example: You bought 100 shares at $50 and 50 shares at $40. Total cost is $7,000 for 150 shares, an average of $46.67. At a current price of $45, the position is worth $6,750 — a $250 (−3.57%) unrealized loss. To bring the average down to $42 by buying at $35, you would need 100 more shares ($3,500).
Averaging down: think first
- Only add if your reason for owning the stock still holds.
- Set a maximum position size so one company cannot sink your portfolio.
- For taxes, brokers usually track cost basis per lot (FIFO by default in the U.S.).
Measure performance over time with the ROI calculator.
Frequently asked questions
How do I calculate my average share price?
Add up the total amount paid for all shares and divide by the total number of shares. 100 shares at $50 plus 50 shares at $40 cost $7,000 for 150 shares — an average of $46.67.
What does averaging down mean?
Buying more shares at a lower price than your average cost, which lowers your average. It reduces the price the stock needs to reach for you to break even — but it also increases your exposure to a falling stock.
How many shares do I need to reach a target average?
Shares needed = (current total cost − target × current shares) ÷ (target − new price). The new price must be below the target and the target below your current average.
Should I include commissions?
For tax purposes your cost basis includes fees. If you pay commissions, add them to the purchase price per share.