How it works
When you buy the same stock at two different prices, your breakeven is the weighted average cost: the total invested divided by the total shares. Buy 50 shares at $100 and 50 more at $80 and the average is $90 — the position breaks even the moment the price recovers to $90, not $100. The calculator gives the average cost, total shares, total invested, and the percentage move needed from the second buy back to breakeven, which is the figure that makes averaging down feel so powerful: the stock fell 20% between buys, yet needs to climb only about 12.5% from the second price for the whole position to be even. That asymmetry is also the danger. Averaging down lowers the breakeven but raises the stake — you now hold twice as many shares of one company, and if the fall was the business deteriorating rather than the market mood swinging, you have doubled exposure to a loser. The technique is sound on a diversified fund, where a fall means the same basket is cheaper, and dangerous on a single failing business. The calculator settles the arithmetic; whether the second buy should happen at all is a judgment about why the price fell.
Formula
Average cost = (shares1 x price1 + shares2 x price2) / (shares1 + shares2)
Tips
- Averaging down lowers the breakeven but raises the stake — know both numbers.
- It is sound on a diversified fund, dangerous on a single failing business.
- Ask why the price fell before buying more — cheap is not the same as undervalued.
- The breakeven move is smaller than the fall — that asymmetry is the temptation.
- Use this for the decision; your broker already tracks the cost basis for tax.
Frequently asked questions
- How do I calculate my average stock price?
- Multiply each buy's shares by its price, add the results, and divide by the total shares. 50 shares at $100 plus 50 at $80 is $9,000 over 100 shares — an average cost of $90. That average, not the first price, is your breakeven.
- What is averaging down?
- Buying more of a stock after it has fallen, which lowers your average cost per share. The position then breaks even at a lower price — 50 shares at $100 plus 50 at $80 breaks even at $90, needing only a 12.5% recovery instead of 25%.
- Is averaging down a good idea?
- It depends entirely on why the price fell. On a diversified fund a fall means the same basket is cheaper — sound. On a single company whose business is deteriorating, it doubles exposure to a loser — dangerous. The calculator settles the arithmetic; the judgment is yours.
- What is averaging up?
- Buying more at a higher price, which raises the average cost above the first buy. It is how momentum positions are built — adding to winners — but the breakeven rises with each addition, so know where it now sits before the next buy.
- Does my broker track average cost for me?
- Yes — your broker tracks cost basis automatically for tax reporting. This calculator is for the decision before the second buy (should it happen, and where does breakeven land?) rather than the record-keeping afterwards.