Stock Average Calculator

About this Calculator:

The Stock Average Calculator is a practical tool designed to help investors determine the **weighted average purchase price** of a stock when they have acquired shares in multiple transactions at varying prices. This average price is often referred to as your **cost basis**. Understanding your true cost basis is fundamental for several reasons, including:

• **Accurate Profit/Loss Assessment:** It provides a clear benchmark to evaluate whether your current holdings are in a profit or loss position.
• **Informed Decision Making:** Knowing your average cost helps you make better decisions about when to buy more shares (e.g., "average down" if the price drops) or when to consider selling.
• **Tax Planning (Indirectly):** While this calculator doesn't directly calculate capital gains tax, your average purchase price is a crucial component in determining gains or losses when you eventually sell shares, which has tax implications.

**How it Works:** This calculator operates on the principle of a **weighted average**. Instead of simply averaging the prices, it gives more weight to transactions where a larger quantity of shares was purchased.

**Formula Used:** Average Price = (Sum of (Buy Price × Quantity)) / (Sum of Quantity)

**Example:** If you bought 10 shares at $100 and later bought 20 shares at $90:
Total Cost = (10 shares * $100) + (20 shares * $90) = $1000 + $1800 = $2800
Total Quantity = 10 shares + 20 shares = 30 shares
Average Price = $2800 / 30 = $93.33

**How to Use:** Simply use the "Add Another Entry" button to create new rows for each time you've purchased the stock. Input the "Buy Price" and "Quantity" for each transaction. If you make a mistake or no longer need an entry, you can remove it using the trash can icon. Once all your buy entries are in, click "Calculate Average Price" to see your consolidated average purchase price.

This tool is designed to be straightforward and provide a quick, accurate calculation of your average cost basis.