Explain it like I’m 5
Say you buy 2 apples for $1 each, then later 2 more apples for $3 each. You paid $8 for 4 apples, so on average each apple cost you $2. That’s your average cost.
Shares work the same way. If you buy the same stock at different prices, your average cost per share is what matters for knowing whether you’re up or down overall.
Buying more when the price drops pulls your average down — that’s called averaging down. This calculator shows your average and how many more shares you’d need to reach a target average.
Words you’ll see, in plain English
- Average cost per share
- If you bought the same stock at different prices, this is the price you paid “on average” for each share.
- Averaging down
- Buying more of a stock after its price falls, so your average price per share goes down.
- Stock / share
- A tiny piece of a company. Own one share of a company with a million shares, and you own one-millionth of it.
- Cost basis
- What you paid for something you invested in, including fees. It’s the starting line for working out your profit.
More money words explained simply in our glossary.
How to use the stock average calculator
- Enter the number of shares and the price for each purchase. Leave unused rows at 0.
- Read your average cost per share, total shares and total invested.
- To plan an average-down (or average-up), enter the average you want and the price you could buy at next.
Average cost formula
Average price = (shares₁ × price₁ + shares₂ × price₂ + …) ÷ (shares₁ + shares₂ + …)
To reach a target average by buying more at a new price:
Shares to buy = current shares × (current average − target) ÷ (target − new price)
Example: averaging down
You own 150 shares with an average cost of $47.33 (100 at $50 and 50 at $42). The stock now trades at $40, and you’d like to bring your average down to $45. You’d need to buy 150 × (47.33 − 45) ÷ (45 − 40) ≈ 70 shares at $40, about $2,800. Afterwards you’d own 220 shares at an average of $45.
Should you average down?
Averaging down makes sense when you still believe in the investment and the lower price is a better deal — for example, regular purchases of a broad index fund. It is riskier with individual stocks: a falling price can reflect real problems, and adding money concentrates your risk. A common guardrail is to decide in advance the maximum share of your portfolio any single stock can become.
Frequently asked questions
How do you calculate the average price of a stock?
Add up the total amount you paid for every purchase (shares × price for each buy), then divide by the total number of shares. Buying 100 shares at $50 and 50 shares at $42 costs $7,100 for 150 shares, an average of $47.33 per share.
What does averaging down mean?
Averaging down means buying more shares of a stock you already own after its price has fallen, which lowers your average cost per share. It reduces the price the stock needs to recover to for you to break even — but it also increases your exposure to a company whose price is falling.
How many shares do I need to buy to lower my average?
Use: shares to buy = current shares × (current average − target average) ÷ (target average − new price). The target must be between your current average and the new purchase price. The calculator does this for you.
Is average cost the same as my cost basis for taxes?
Not always. For individual stocks, US brokers usually track each purchase (tax lot) separately and default to first-in, first-out (FIFO) when you sell, unless you choose specific lots. The average cost method is generally available for mutual funds and certain dividend reinvestment plans. Your average price is still the right number for judging overall profit or loss on a position.
These results are estimates for education only, based on the assumptions you enter. They are not financial, investment or tax advice. Real returns, rates and taxes vary. See our methodology anddisclaimer.