Average Cost Calculator
Contents
What Is An Average Cost Calculator?
The average cost calculator is a handy tool to help you calculate the average price for any group of investment you’ve purchased. These could be investments in bitcoin, stocks or any other assets and this average price also goes by the name of Weighted Average Cost Calculation (WACC).
When investing most people make multiple purchases of the same asset over time. For example they might buy 1 bitcoin in 2020, then 1 bitcoin in 2021 and a final 1 bitcoin in 2022. As these 3 bitcoin are all purchased at different prices, this tool helps investors determine what the average price they paid for all 3 BTC is.
Why You Need To Calculate Average Purchase Price
Knowing what your investments weighted average price is can not only help with your overall investment strategy, but allow you to monitor your entire portfolio’s performance more accurately too.
It can be especially helpful when comparing the average price to the current market price as this will let you know if your investments are profitable or not. The calculated average purchase price can also be a valuable tool when you’re making Dollar Cost Averaging (DCA) investments as this investment strategy often results in many smaller investments rather than one single big one.
How To Calculate Average Price
As you can calculate average prices of anything, let’s imagine you want to calculate the average price of a particular stock for this example. You need to know the purchase price of each share and the quantity bought.
Stock Price Example
- 100 shares purchased for $100
- 100 shares purchased for $200
- 100 shares purchased for $300
Average Cost = Total Amount Shares Bought / Total Number Of Shares
Total Amount Of Shares Purchased = (100 x $100) + (100 x $200) + (100 x $300) = $10,000 + $20,000 + $30,000 = $60,000
Total Number Of Shares = 100 + 100 + 100 = 300
Average Cost = $60,000 / 300 = $200 average purchase price
While the above calculation isn’t too complicated, when you’re dealing with dozens or even hundreds of different trades all with different prices, things can get pretty complicated. Using the above calculator tool to get your average price is quick and makes sure you get accurate calculations.
FAQ
Is The Average Cost Calculator Only For Long-Term Investors?
It’s for anyone who wants to understand what their average purchase price is after they’ve made multiple sets of investments. Usually long term investors are the ones that have the most number of investments, but this type of calculator tool is also used by day traders as well.
Is Dollar-Cost Averaging Worth It?
Dollar Cost Averaging or DCA is often recommended as one of the best long term investment strategies. In the case of Bitcoin, there have been many simulations run that show it’s be highly profitable if done consistently over a 4 year time period or longer. Do be aware though that past performance is not an indicator of future performance.
