What averaging down does
Averaging down means buying more of a stock you already own at a price below your average cost. The new shares pull the average cost per share down, so the price no longer has to climb all the way back to your original purchase price for the whole position to break even. The calculator shows the new average, how much it changes, how many shares a target average would need and how your unrealized profit or loss compares before and after the purchase.
New average = (shares held × current average + new shares × new price) ÷ (shares held + new shares)
Shares needed for a target = shares held × (current average − target) ÷ (target − new price)
Enter a current average that already includes the fees you paid, and add the fee of the new purchase to its price if you want the result to include it. Choose the currency of your amounts in the calculator; it only sets the unit and converts nothing.
Worked example
You hold 100 shares with an average cost of 50. The price has fallen to 30 and you consider buying 100 more:
- Total invested: 100 × 50 + 100 × 30 = 8,000 for 200 shares
- New average cost: 8,000 ÷ 200 = 40.00, a change of −20.00%
- To reach an average of 45 instead, you would need 100 × (50 − 45) ÷ (45 − 30) ≈ 33.3333 shares, costing 1,000.00
The table in the calculator repeats the calculation for half, the same, double and triple the planned quantity. In this example, 50 shares give an average of 43.33, 200 shares 36.67 and 300 shares 35.00. Each additional share moves the average less than the one before, because the average can never fall below the new price.
Before and after: what changes and what does not
If the current price is 35, the 100 shares you hold show an unrealized loss of −1,500. After buying 100 more at 30, the 200 shares are worth 7,000 against 8,000 invested, an unrealized loss of −1,000. The loss is smaller only because the new shares were bought below the current price. Averaging down does not make an existing loss disappear: at any given price, the money you have lost on the original shares stays the same. What changes is the break-even price, which falls from 50 to 40, and the amount of money exposed to the same stock, which rises from 5,000 to 8,000.
Why a target can be out of reach
The target must lie between the new price and your current average. A target above your current average is already met, and a target at or below the new price can never be reached, however many shares you buy: buying ever more at 30 only brings the average closer and closer to 30. The calculator reports such a target as an error instead of returning a meaningless number.
Points to weigh
- A lower average is not a reason to buy on its own. A falling price can reflect real problems with the company, and averaging down increases the share of your portfolio in that one position.
- The quantity needed for a target can be fractional; most brokers trade whole shares, so round it up.
- The rule is the same as in the stock average calculator and the Numfolio transaction ledger, so the results agree with your recorded trades. To see the profit when you sell, use the stock profit calculator.
- This page shows arithmetic only. It does not recommend buying, selling or holding any security and is not investment advice.
