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Cost Average Formula:
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Cost averaging, also known as dollar-cost averaging, is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the share price. This calculator helps determine the average cost per share of your investments.
The calculator uses the cost average formula:
Where:
Explanation: This simple calculation divides your total investment by the number of shares you've acquired to determine your average cost per share.
Details: Cost averaging helps investors reduce the impact of market volatility on their investments. By investing consistently over time, you buy more shares when prices are low and fewer when prices are high, potentially lowering your average cost per share.
Tips: Enter the total amount you've invested in dollars and the total number of shares you've purchased. Both values must be positive numbers.
Q1: What is dollar-cost averaging?
A: Dollar-cost averaging is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions.
Q2: How does cost averaging benefit investors?
A: It helps reduce the impact of market volatility, eliminates the need to time the market, and encourages disciplined investing.
Q3: Should I include commissions and fees in the total invested?
A: Yes, for the most accurate average cost calculation, include any commissions or fees paid as part of your total investment.
Q4: What if I've bought shares at different prices?
A: This calculator works perfectly for that scenario. Just input the total amount invested and the total number of shares purchased across all transactions.
Q5: How often should I calculate my average cost?
A: It's helpful to calculate your average cost after each investment or periodically to track your investment performance.