Average cost: instructions and assumptions
Understand your inputs, results and the assumptions behind the calculation.
Averaging down and average purchase cost
Buying additional shares below your current cost lowers the average. Lowering the average and recovering a loss are different things. Adding money also increases total exposure to the same asset.
New average cost = total cost ÷ total shares
Market value = current price × shares held
Unrealized gain/loss = market value − total cost
Unrealized return = unrealized gain/loss ÷ total cost × 100
Example: 100 shares at KRW 70,000, plus 100 at KRW 50,000
The existing purchase cost is KRW 7 million and the additional cost KRW 5 million. KRW 12 million for 200 shares gives an average cost of KRW 60,000, about 14.29% below the original KRW 70,000.
At a current price of KRW 50,000, the position is worth KRW 10 million immediately after buying more. The loss before fees remains KRW 2 million. The loss percentage changes from about −28.57% to −16.67%, but the monetary loss has not disappeared.
Check unrealized gains using the current price
Enter the current price manually. At KRW 50,000 in this example, the existing shares are worth KRW 5 million with a KRW 2 million loss (−28.57%). After buying more, market value is KRW 10 million with the same KRW 2 million loss (−16.67%). The after-purchase result assumes a purchase at the price and quantity entered.
Set the additional quantity to zero to calculate the existing position alone. Fees, tax, dividends and exchange-rate changes are excluded, so results may differ from your broker. No account connection or automatic current-price lookup is provided.
Quantities matter as well as prices
Average cost is weighted by share count, not a simple average of two prices. Buying 100 shares at KRW 70,000 and 10 at KRW 50,000 gives an average of about KRW 68,182. To reach the midpoint of KRW 60,000, the quantities must be equal.
How to use the results
- Check your existing purchase price and number of shares.
- Set a maximum additional investment before choosing a purchase.
- Enter possible prices and quantities to check total exposure.
- Also calculate the loss you could face if prices fall further.
Average cost is not a buy signal
A lower average cost says nothing about company value or the chance of a recovery. Without fees or tax, average cost is the break-even price. Real trades need a higher selling price to cover costs. This calculator does not recommend buying more.
Can I buy more at a higher price?
Yes. The same formula applies and the average cost rises. This tool works for additional purchases at either a lower or a higher price.
Related reading: Review loss risk before average cost