When you buy shares of stock at different prices, you’ll want to know what the average price, or cost, of your position is to help you determine whether the stock is a profitable investment. For example, you may buy shares of a stock for $4 one month and more shares of the same stock for $3 the next month. The average price of your position equals the total purchase price divided by the total number of shares purchased. The higher the stock’s price rises above the average price of your position, the more profit you will make.
Gather Your Trade Information
To calculate the average cost of your stock, you'll need all the information about your share purchases. You should have confirmations from your brokerage for every trade you made. If not, you can call your broker or check the online website, where your individual transactions should be listed.
Determine Your Number of Shares
First, add up the number of total shares you own. Most brokerage statements will list your total position, but you can also calculate it by adding up the share amounts in each of your individual purchases. For example, if you bought 100 shares of a stock at $10 per share, 200 shares at $7 per share and 250 shares at $8.50, you have 550 total shares. Don't forget to subtract the number of any shares you have sold since you purchased them.
Calculate Your Total Cost
Multiply the number of shares in each transaction by its purchase price. In this example, multiply 100 by $10 to get $1,000, multiply 200 by $7 to get $1,400, and multiply 250 by $8.50 to get $2,125. Add the amount of each purchase to calculate the total purchase price of the stock. In this example, calculate the sum of $1,000, $1,400 and $2,125 to get a total purchase price of $4,525.
If you want to factor in the cost of commissions to your average per-share price, use the total cost of each trade, not just the price of the stock at the time of purchase. For example, if you bought 100 shares at $10 but you paid $4.95 for the trade, your total cost for that trade would be $1,004.95, not $1,000.
Calculate Your Average Cost
Divide the total purchase price by the total number of shares to calculate the average price of the position. In this example, divide $4,525 by 550 to get an average price of $8.23 per share.
- Recalculate the average price of your position each time you add to or reduce the size of your position in a stock.