Stock Average Calculator
Print| Total Combined Shares | 0 |
| Total Amount Invested | $0.00 |
When accumulating shares of a stock over time through multiple purchases at varying market prices—whether implementing a systematic Dollar Cost Averaging (DCA) strategy or “averaging down” during a market dip—calculating your overall position cost cannot be done by simply taking a simple average of purchase prices. You must calculate a Weighted Average Share Price based on share volume.
Our free Stock Average Calculator computes your total invested capital, cumulative share count, and exact weighted average cost basis per share across multiple trade tranches.
How to Calculate Weighted Average Share Price
Calculating the weighted average share price divides total capital spent across all purchases by the total cumulative number of shares acquired.
Weighted Average Share Price Formula:
Weighted Average Price = Total Capital Invested / Total Cumulative Shares
Total Capital Invested Formula:
Total Capital = ( Shares₁ × Price₁ ) + ( Shares₂ × Price₂ ) + ... + ( Sharesₙ × Priceₙ )
Total Cumulative Shares = Shares₁ + Shares₂ + ... + Sharesₙ
Step-by-Step Averaging Down Example
Imagine an investor builds an equity position in a company across two separate buy transactions:
- Tranche 1 (Initial Purchase): 100 shares bought at $50.00 per share ($5,000 total outlay).
- Tranche 2 (Averaging Down): Following a market dip, 200 additional shares bought at $35.00 per share ($7,000 total outlay).
Let’s calculate the total capital spent, total shares owned, and new weighted average share price:
Total Capital Invested = $5,000 + $7,000 = $12,000.00
Total Cumulative Shares = 100 + 200 = 300 shares
Weighted Average Share Price = $12,000 / 300 shares = $40.00 per share
| Purchase Tranche | Shares Bought | Purchase Share Price | Tranche Outlay | Weighted Average Cost Basis |
|---|---|---|---|---|
| Tranche 1 (Initial Buy) | 100 shares | $50.00 / share | $5,000.00 | $50.00 / share |
| Tranche 2 (Averaging Down) | 200 shares | $35.00 / share | $7,000.00 | $40.00 / share (Lowered) |
| Combined Position | 300 total shares | — | $12,000.00 Total | $40.00 Weighted Average |
Frequently Asked Questions (FAQ)
What is Dollar Cost Averaging (DCA)?
Dollar Cost Averaging (DCA) is an investment strategy where an investor commits a fixed dollar amount at regular time intervals (e.g., $500 every month) to buy shares of a stock or ETF regardless of share price. DCA automatically buys more shares when prices are low and fewer shares when prices are high.
What does “averaging down” mean in stock trading?
Averaging down is the practice of purchasing additional shares of a stock after its price drops below your initial entry price. This lowers your overall weighted average cost basis per share, reducing the break-even price required for the trade to become profitable.
Why is a simple average of share prices mathematically incorrect for stock positions?
A simple average ignores share volume differences across orders. If you buy 10 shares at $100 and 1,000 shares at $50, taking a simple average ($100 + $50) / 2 = $75 gives a completely false cost basis. The true weighted average cost basis is $51,000 / 1,010 = $50.50.