Stock Average Calculator

Average cost per share (also called cost basis) is the weighted average price you paid for all shares of a particular stock. When you buy shares at different prices over time, your average cost determines your actual profit or loss when you sell.

The formula is straightforward: Average Cost = Total Amount Invested / Total Shares Owned

For example, if you bought 50 shares at $100 and then 75 shares at $80, your total investment is $11,000 for 125 shares, giving you an average cost of $88 per share.

Your average cost determines your taxable gain or loss when you sell. The IRS requires investors to track their cost basis accurately. Most brokers track this automatically, but it is important to understand the math, especially if you transfer shares between accounts.

Average cost also helps you make informed decisions about adding to existing positions. If a stock you own at $100 drops to $80, buying more shares lowers your average cost, meaning the stock needs to recover less for you to break even. This strategy is called "averaging down."

However, averaging down is not always wise. If the stock is falling due to deteriorating fundamentals rather than temporary market sentiment, adding more shares increases your exposure to a declining asset.

The IRS allows several methods for calculating cost basis when selling partial positions:

• Average cost: Uses the average price of all shares. Most common for mutual funds and what this calculator computes.
• FIFO (First In, First Out): Assumes you sell the oldest shares first. This is the default for individual stocks.
• Specific identification: You choose exactly which shares to sell, potentially minimizing taxes by selling higher-cost shares first.

For tax-loss harvesting, specific identification is most flexible. Consult a tax professional for your specific situation.