Share averaging is a term that is often used in the financial markets, specifically with stocks and options. It is used when someone is already holding a specific position, then are looking to add to it. When they add to their position it will change their average cost per share and total share count, this calculator makes those values clear for you.
Share average is a rather simple calculation, you divide your total investment by the number of shares you have to get the share average. You can use this tool to help you get an idea as to what the new average share price will be for you which requires a bit more work to figure out.
This can be done by doing the following formula:
Average Price = ((Initial Shares Value + New Shares Value) / New Total Share Amount)
Let's say you already own 500 shares of stock A at $3.50 per share. You now want to buy another 750 shares of it, now that it is down to $2.65 a share. We can use that formula to calculate what the new average share price would be after making that purchase.
Share Average = ((500 * 3.50) + (750 * 2.65)) / (500 + 750))
This results in a new average share price of $2.99.
This tool is very easy to use and can get you your results in just seconds. The steps required are:
If you average up on a position in your portfolio, it can be both good and bad. If you have high conviction in the asset it is a good move, if not it may not be. Only time will tell how it performs.
Downside averaging is when you add to a position when you are already down on it. This can be good as it will lower your cost per share, but you are now more invested in something that is not profitable currently. You are running the risk of being exposed to more losses but will be in the profit zone sooner if it begins to go up since the average cost per share has fallen.
Create Date: September 12, 2024
Last Modified Date: September 19, 2024
