What Will Happen if I Buy the Same Stock at Different Prices?

If you end up buying the stock at different prices, you need not worry. Your purchase price would be worked out on an average price. Below we'll have a look at how to calculate the average buying price of your stock and whether you can lower it.

How to Calculate Average Buying Price

To determine your average buying price, you add the total amount of money you spend buying all the shares and divide it by the total number of shares bought.

Pretend that you bought 100 shares at $10 per share and another 100 shares at $12 per share; you would have a total of 200 shares with an average buying price of $11 per share.

Example

Total shares: 100 + 100 = 200 shares

Total Cost: ($10 x 100) + ($12 x 100) = $2200

Average buying price: $2200 / 200 = $11

Following the above formula will give you accurate figures even if you bought the shares in uneven tranches, such as 20 shares, followed by 35 shares and another 42 shares, all at different prices.

Lowering Average Buying Price

When investors go long-term, they tend to buy more shares in a company as the price falls because they believe in its long-term potential, and it lowers their average buying price/costs.

On the other hand, short-term traders tend to buy more shares of a stock as the price rises as they look to ride a trend all the way to the top. Therefore, the effect of buying shares at different prices will differ depending on whether you are a trader or a long-term investor.

In the End

Whether you are a long-term investor or a short-term trader, the above formula for calculating average stock prices when buying stocks at different prices will work for you.