How is the average share price calculated?
If you bought the same share several times at different prices, your average price = total amount paid ÷ total number of shares. This is a weighted average: each purchase moves the average in proportion to its number of shares, not just its price. If you enter your broker’s commission it is added to the cost, so the average becomes your true cost per share.
Example
You bought 100 shares at 50 (5,000) and, after the price fell, another 100 at 40 (4,000). Your average = 9,000 ÷ 200 = 45. If the price is now 42, your shares are worth 8,400, so selling now would lose 600 (6.67%).
With a commission of, say, 0.15%: the cost becomes 9,013.50, the average 45.068, and the break-even price (where selling returns your money after the sell commission) about 45.135.
Averaging down
Averaging down means buying more shares at a lower price so your average falls. Same example: if the price drops to 40 and you want an average of 43. Shares needed = (current cost − target × shares held) ÷ (target − buy price) = (9,000 − 8,600) ÷ 3 = 133.3, so 134 shares for about 5,360, giving an average of 42.994.
The average can never reach the new purchase price: the closer you aim to it, the more shares you need. Averaging down also puts more money into a single share, so it is an investment decision with its own risks, not just a calculation.
Bonus shares and rights issues
| Case | How to enter it | Effect on the average |
|---|---|---|
| Bonus shares (free) | A new row at a price of 0 with the shares you received | The average falls. Example: 200 shares at an average of 45 plus 1 bonus share per 10 = 20 shares; the average becomes 9,000 ÷ 220 = 40.909 |
| Rights issue | A row at the subscription price with the shares you took up | Like any purchase |
| Selling part of the holding | Not entered; reduce the shares only if you want your current count | Selling does not change the average of the remaining shares under the weighted-average method |
| Cash dividends | Not entered | Do not change the average in this method (some apps subtract them, so their figure looks lower) |
Frequently Asked Questions
How do I calculate my average share price?
Add up what you paid in all purchases (price × shares for each) and divide by the total number of shares. For example, 100 shares at 50 and 100 at 40: (5,000 + 4,000) ÷ 200 = 45.
What does averaging down mean?
Buying more shares below your average so the average falls. Enter the current price and the average you want, and the calculator tells you how many shares to buy and what they cost.
Why does my broker’s app show a different average?
Usually because of commission: some apps add it to the cost and some do not, so try entering it or leaving it empty. Some apps also subtract cash dividends from the cost, or round to fewer decimals.
Does selling change my average price?
No, under the weighted-average method most brokers use: selling part of your shares leaves the average of the remaining shares unchanged; the profit or loss is counted on the part you sold.
Does it work for any stock market?
Yes. The arithmetic is the same on the Saudi Exchange (Tadawul), the Egyptian Exchange, Dubai, Abu Dhabi, Kuwait, Qatar or US markets. The currency is for display only.
What about zakat on shares?
Use the Zakat Calculator, and see the Savings Calculator and the Percentage Calculator.