Most investors never buy an entire allocation to a stock in one purchase. Instead, many investors choose to ease into a position. Some might dollar-cost average into a stock by investing a set amount of money, on a set day, over a set period of time. Others choose to buy in thirds or some other fraction. In addition to that, investors often will buy more of a stock when it has been unjustly sold off by the market or because they believe in its potential. Overall, most investors feel more confident when averaging into a position because it is not only a disciplined approach to take, but it helps to reduce their overall risk because this approach helps to smooth out some of the market's volatility.
That being said, averaging into a stock does require a bit more work. Not only do investors need to decide which path they'll take to average into a position, but each subsequent investment changes the breakeven point of the position, which is the average cost paid for a stock. It's an important number to know and one that is pretty easy to figure out. It just requires a little bit of spreadsheet magic.
Let's suppose you're finally ready to start investing, but smartly choose to ease into your first investment. You've chosen a conservative first investment, the venerable Blue Chip (ticker: BLUC) and decided to invest $250 a month, on the first trading day of the month over the next six months. While the stock was trading for $25 per share at that initial investment, it moved around quite a bit over the next few months due to a market meltdown and subsequent recovery. While that volatility made you uneasy, you stuck with the plan and now want to know what your breakeven point is given that your purchase prices were all over the map.
There are just a few simple steps to figure out this price:
- In the spreadsheet program of your choice, or by hand if that suits your fancy, make columns for the purchase date, amount invested, shares bought, and average purchase price.
- Fill in the data for the first three columns from your brokerage statements.
- Sum the amount invested and shares bought columns.
- Divide the total amount invested by the total shares bought. You can also figure out the average purchase price for each investment by dividing the amount invested by the shares bought at each purchase.
- Voila! You now have your average purchase price for your stock position.
Here's a sample of what that would look like on a spreadsheet:
Purchase date | Amount Invested | Shares Bought | Average Purchase Price |
|---|
January | $250.00 | 10 | $25.00 |
February | $250.00 | 12 | $20.83 |
March | $250.00 | 15 | $16.67 |
April | $250.00 | 12 | $20.83 |
May | $250.00 | 11 | $22.73 |
June | $250.00 | 9 | $27.78 |
Total | $1,500.00 | 69 | $21.74 |
In this example, dollar-cost averaging paid off by netting a much lower average purchase price than the initial investment. While that's not always the way it works, the key point to understand is that by figuring out the average price of a stock position, you'll now have a firm grasp on that position's breakeven point and be able to easily figure out the investing returns.
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FAQs
Divide the total amount invested by the total shares bought. You can also figure out the average purchase price for each investment by dividing the amount invested by the shares bought at each purchase. Voila! You now have your average purchase price for your stock position.
How do you calculate the average stock trade price? ›
Average price is calculated by taking the sum of the values and dividing it by the number of prices being examined.
How do I figure out my average? ›
Average This is the arithmetic mean, and is calculated by adding a group of numbers and then dividing by the count of those numbers. For example, the average of 2, 3, 3, 5, 7, and 10 is 30 divided by 6, which is 5.
What is the position formula? ›
Δx = x2 – x1
x2 is the final position of the object, x1 is the initial position of the object, and. Δx. change in the position of the object.
What is an average of position? ›
Positional average refers to the average which are taken out through observation from the series where a particular value from the series is picked up which represents the whole series. In median, the middle most value of the series is taken as the representative value. Therefore, median is a positional average.
What is the average trade price of a stock? ›
Average Trading Price means the average closing bid price of the Company's common stock for a period of 20 consecutive trading days prior to the Loan Closing Date.
What are the 3 ways to calculate average? ›
There are three main types of average: mean, median and mode. Each of these techniques works slightly differently and often results in slightly different typical values. The mean is the most commonly used average. To get the mean value, you add up all the values and divide this total by the number of values.
Is averaging average accurate? ›
If you attempt to create an “average of averages”, the single data point will disproportionately affect the outcome. The average of 10,000 data items basically gets valued at the same rate as the average of the single data point. The “average of averages” would be 6, but the correct average of all values would be 10.
What is a position calculator? ›
The CYT position size calculator is a great tool for knowing when to enter, when to exit and how much to risk when you are wrong. The calculator is built primarily for the stock market and helps you buy or sell any stock, ETF or mutual fund and control your maximum risk per position.
What are the 3 positional averages? ›
Three positional averages are : Mean, Median and Mode.
There are two types of positional average: the median and the mode. The median is the average value of the series in which half the values are less than the median and half the values are greater than the median. The mode, the second positional average, shows a higher frequency in the series.
Is percentile a positional average? ›
Both percentiles and quartiles are statistical measures of position; that is, they do not measure a central tendency or a spread (dispersion), but instead measure location in a data set.
Which is the best average method? ›
The most widely used method of calculating an average is the 'mean'. When the term 'average' is used in a mathematical sense, it usually refers to the mean, especially when no other information is given. Add the numbers together and divide by the number of numbers. (The sum of values divided by the number of values).
What is mathematical average and positional average? ›
While in the case of mathematical averages the calculated value might not be in the series of the respective data set but in the case of positional averages, the calculated average value must be a value that lies within the set of observed data. The types of Positional Averages are: · Median. · Mode.
What are the four measures of average? ›
The four measures of center are mean, median, mode, and midrange. Mean – The mean is what you know as the average. It is calculated by taking all of the values in a set and dividing them by the total number of values in that set. The mean is very sensitive to outliers (more on outliers in a little bit).
What is the most accurate average? ›
Mean is generally considered the best measure of central tendency and the most frequently used one.
Why average is not a good indicator? ›
You may have outliers, which will distort your average values. Even if you do not have outliers, you may be averaging different populations. Even if you have a single population, that population may have a skewed distribution (which in fact is normally the case for Internet applications).
What is more accurate than an average? ›
The median is calculated by taking the “middle” value, the value for which half of the observations are larger and half are smaller. When there is a possibility of extreme values, the median is generally the better measure to use.
How do you calculate MP and AP? ›
We calculate it as APL=TPL/L, where APL is the average product of labour, TPL is the total product of labour and L is the amount of labour input used. 3. Marginal product: Marginal product of an input is defined as the change in output per unit of change in the input when all other inputs are held constant.
How is AMC calculated? ›
AMC is calculated by totaling the quantity of medicine dispensed over the last three or four months and dividing this total by the number of months of data used. To determine the order quantity, multiply AMC by the maximum number of months of stock desired (e.g., 3).
To calculate the average selling price of a product, divide the total revenue earned from the product or service and divide it by the number of products or services sold.
What is the formula to calculate MP? ›
M.P. = [(100 + Gain%)/(100 – Discount%)] × C.P.
What is the formula for calculating MPS? ›
MPS is most often used in Keynesian economic theory. It is calculated simply by dividing the change in savings observed given a change in income: MPS = ΔS/ΔY.
How MPC and MPS are calculated? ›
How are MPC and MPS calculated? The marginal propensity to consume (MPC) is found by dividing the change in spending on consumption by the change in someone's income. The marginal propensity to save (MPS) is similarly found by dividing the change in saving by the change in income.
What is the minimum net worth required for AMC? ›
In case the applicant is not complying with only the requirement of profitability, the applicant may be considered to sponsor a mutual fund subject to having a net worth of not less than INR 100 crores for the purpose of contribution towards networth of Asset Management Company (AMC) and the AMC should maintain the net ...
How much is a full share of AMC? ›
Cl A Stock Quote (U.S.: NYSE)
...
$ 5.23.
| Close | Chg | Chg % |
|---|
| $5.24 | -0.01 | -0.19% |
Unlike some other charges which can be waived, a Demat account holder will need to pay an annual maintenance charge or AMC to the depository participant for the services that have been provided. These are also known as folio maintenance charges and can range from Rs. 300 to Rs. 900 a year.
What is an example of average price? ›
Divide the price total by the number of prices to determine the average price. In the above example, you can divide $9.14 by 5 to determine an average price of $1.83 per litre of milk in the past month.
What is the average stock price? ›
Average Stock Price means the average of the closing transaction prices of a share of common stock of a company, as reported on the principal national stock exchange on which such common stock is traded, for the 20 business days immediately preceding the date for which the Average Stock Price is being determined.
