Find your weighted average buy price across up to three purchases (averaging up or down).
Average price = Total amount invested ÷ Total quantity bought, across all purchase lots.
Educational tool only — not investment advice. Markets involve risk; past performance and illustrative math don't guarantee future results.
Average cost per share (also called cost basis) when buying the same stock at different prices is a straightforward weighted average: (Price1 × Quantity1 + Price2 × Quantity2 + ...) ÷ Total Shares. Buying 10 shares at $50 and later 20 shares at $40 gives an average of ($500 + $800) ÷ 30 = $43.33 per share — lower than the first purchase, higher than the second, weighted toward whichever batch was larger. This math is exact and never in dispute; what's genuinely debatable is the strategic decision behind it — buying more shares after a price drop specifically to lower the average cost, a practice known as "averaging down."
The mechanical benefit of averaging down is real: a lower average cost means a lower break-even price, so the position can return to profitability with a smaller subsequent recovery. But the risk is just as real and frequently underweighted — a falling price doesn't automatically mean a buying opportunity, and continuing to add shares to a stock that's falling for legitimate fundamental reasons (deteriorating business, not just market noise) compounds the exposure to a genuinely bad investment rather than improving it. The core discipline worth applying before averaging down: a lower cost basis is not by itself proof the trade has improved — the market doesn't care where an individual investor's average sits, only whether the original investment thesis still holds and whether adding more capital to the position is still justified on its own merits, independent of the average-cost math.
Average Cost = (Price₁ × Quantity₁ + Price₂ × Quantity₂ + ...) ÷ Total Shares Owned. For example, 10 shares bought at $50 plus 20 shares bought at $40 gives ($500 + $800) ÷ 30 = $43.33 average cost per share.
Averaging down means buying more shares of a stock after its price has fallen, which lowers your average cost per share and therefore lowers the price the stock needs to reach for the position to break even. The math is straightforward, but it doesn't by itself make the investment sounder.
Not necessarily — it depends entirely on why the price fell. If the decline reflects genuine fundamental problems with the business rather than short-term market noise, adding more shares increases exposure to a deteriorating investment rather than improving the position. A lower average cost is not proof the trade has gotten better.
Whether the original reason you bought the stock still holds, and whether adding more capital to this specific position is justified on its own merits right now — not just whether it would lower your average cost. The average cost figure describes your cost basis; it says nothing about whether the underlying investment thesis is still valid.