Average Cost Per Share Calculator
Calculate your average cost per share across multiple purchases (Dollar Cost Averaging)
Track Your Purchases
Add all your stock purchases to calculate your average cost per share
Purchase #1
What is Average Cost?
Average cost per share is the total amount you've invested divided by the total number of shares you own. This is especially useful when you've made multiple purchases at different prices through Dollar Cost Averaging (DCA).
Formula
Total Cost = Σ (Shares × Price per Share)
Average Cost = Total Cost ÷ Total Shares
Why Calculate Average Cost?
- Understand your true cost basis for tax purposes
- Make informed decisions about when to sell
- Track the effectiveness of your DCA strategy
- Calculate break-even points for future sales
Dollar Cost Averaging Benefits
By making regular purchases regardless of price, you can reduce the impact of volatility and avoid trying to time the market. This calculator helps you see the results of this strategy.
How DCA Works in Practice
Imagine buying $500 of stock every month for six months. Month 1 the stock trades at $50, so you buy 10 shares. Month 2 it drops to $40 - now you get 12.5 shares. Month 3 it hits $60, and you get 8.33 shares.
At the end, your average cost per share is lower than if you'd bought everything at the beginning. You automatically buy more shares when prices are low and fewer when prices are high. No market timing required.
When DCA Outperforms
Dollar cost averaging shines in volatile markets. When prices swing wildly, DCA smooths your entry point. You avoid the psychological trap of waiting for the "perfect" moment to invest, which often never comes.
However, in steadily rising markets, lump-sum investing typically beats DCA. If you have cash available, historical data shows immediate investment usually wins. But if you receive income periodically (like monthly paychecks), DCA is your natural strategy.
Tax Implications
Your average cost per share determines your cost basis for tax purposes. When you sell, the IRS calculates your capital gain using this number. Accurate tracking matters - it can save you significant money at tax time.
Most brokers calculate this automatically, but manual tracking ensures accuracy. Use our Capital Gains Tax Calculator to estimate your tax liability before selling.
DCA Strategy Tips
- Set up automatic investments to remove emotion from the equation
- Stay consistent - don't skip purchases when markets feel scary
- Focus on quality companies or index funds for long-term DCA
- Track your average cost to identify your break-even point
- Consider increasing contributions when markets drop significantly
Frequently Asked Questions
What is dollar cost averaging (DCA)?
Dollar cost averaging is an investment strategy where you make regular purchases of the same stock at different prices. This reduces the impact of volatility and helps you avoid trying to time the market. This calculator shows your average cost per share across all purchases.
Why is average cost per share important?
Your average cost per share determines your cost basis for tax purposes and helps you calculate your break-even point. Understanding this number is essential for making informed decisions about when to sell and for accurate tax reporting.
Does this calculator account for fees?
No, this calculator focuses on share price only. For calculations including transaction fees, use our Break-Even Calculator or Stock Profit Calculator which factor in all trading costs.