How to Calculate Average Price Per Share

Calculating the average price per share helps investors understand their overall investment cost for a particular stock. This figure represents the total amount spent to acquire all shares of a specific company, divided by the total number of shares owned. It provides the investment’s cost basis, which is used for evaluating performance and tax purposes. Knowing this average price allows an investor to assess profitability more accurately than by looking at individual purchase prices.

Understanding the Core Calculation

The average price per share is calculated by dividing the total cost of all shares by the total number of shares acquired. For instance, if an investor purchases 100 shares of a company at $50 per share, the initial total cost is $5,000.

This “total cost” includes the purchase price and any associated expenses, such as commissions or trading fees. While many brokerage platforms now offer commission-free trading, historically, fees were common, ranging from a few dollars per trade up to 1% or 2% of the transaction value. If a $10 commission was paid on the 100 shares at $50 each, the total cost would be $5,010. Dividing $5,010 by 100 shares results in an average price of $50.10 per share.

Calculating with Multiple Purchases

When an investor buys additional shares of the same stock at different times and prices, the average price per share changes. The calculation becomes cumulative, reflecting the total investment across all transactions. Sum the total cost of all purchases and divide by the total number of shares owned.

For example, if an investor initially bought 100 shares at $50.10 per share (including fees), and later purchased another 50 shares at $48 each with no additional fees, the calculation adjusts. The first purchase cost $5,010, and the second purchase cost $2,400, bringing the cumulative total cost to $7,410. With 150 total shares owned, the new average price per share would be $49.40 ($7,410 divided by 150 shares). This method can gradually lower the overall average cost if subsequent purchases are made at prices below the initial average.

Adjusting for Sales

Selling a portion of shares impacts the average price per share of the remaining investment. When shares are sold, their associated cost is removed from the total cost basis, and the number of sold shares is subtracted from the total shares held. The average price for the remaining shares is then recalculated based on the adjusted total cost and remaining share count.

Note that selling shares does not change the average price of shares already sold, which is relevant for tax purposes. For instance, if an investor sells 50 shares from a holding of 150 shares that had an average cost of $49.40, the specific cost basis of the 50 shares sold is identified and removed. The remaining 100 shares then have their own updated average price based on their original acquisition costs.

Impact of Corporate Actions

Corporate actions, such as stock splits and stock dividends, can influence the average price per share without new cash investment. A stock split increases the number of shares an investor owns while proportionally decreasing the price per share. For instance, a 2-for-1 stock split means an investor receives two shares for every one previously held, effectively halving the average price per share while the total cost basis remains unchanged.

If an investor held 100 shares at an average price of $50, a 2-for-1 split results in 200 shares with an average price of $25, maintaining the same total investment value. Similarly, stock dividends provide additional shares. For a pure stock dividend, where no new capital is invested, the original cost basis is spread across the increased number of shares. This lowers the average cost per share.

Practical Methods for Tracking

Tracking the average price per share is simplified by various resources and tools. Most brokerage firms automatically calculate and display an investor’s average cost basis for securities held in their accounts. This information is typically accessible through online statements or the portfolio management section of the brokerage platform.

For investors who prefer a hands-on approach, a simple spreadsheet can be an effective tool. Recording each transaction’s date, number of shares, price, and any associated fees allows for manual calculation of the running average price. Additionally, personal finance software and investment tracking applications automate the calculation and reporting of average price per share.