How the weighted average is calculated
Your current cost basis is the number of shares already owned multiplied by their average cost. The additional purchase cost equals new shares multiplied by the purchase price, plus any fee entered. Dividing the combined cost by the combined share count produces the new average.
Worked example
Suppose you own 100 shares at an average cost of $50, for a $5,000 cost basis. Buying 50 more shares at $40 adds $2,000. You would then own 150 shares with a $7,000 total cost basis and an average cost of about $46.67 per share.
When averaging down changes the result
A purchase below your current average lowers the weighted average. A purchase above it raises the average. The size of the change depends on both the price difference and the number of additional shares. A lower average cost does not reduce the market risk of the position.
Fractional shares and fees
The calculator accepts fractional shares and includes an optional fee in the cost basis. Your broker may calculate tax lots, commissions, foreign exchange costs, wash sales, and realized gains differently, so use your brokerage records for tax reporting.
Before adding to a losing position
Check whether the investment thesis, diversification, time horizon, and downside risk still fit your plan. Averaging down increases the amount exposed to the same asset and does not guarantee recovery.
Related tools: model long-term contributions with the Compound Interest Calculator or estimate doubling time with the Rule of 72 Calculator. See all assumptions in the methodology.