How to use it
- Use the formula below with your own figures.
The formula
Average cost = total spent ÷ shares owned.
Worked example
Buying at $10 and $20 in equal amounts averages near $13.3.
Frequently asked questions
Why average down?
It lowers your break-even price.
Risk?
Adding to a falling position can raise exposure.
Tips
- Time in the market beats timing the market.
- Reinvest returns to let compounding work.
- Keep fees low — they compound against you.
Key terms
- Compounding
- Earning returns on past returns.
- CAGR
- The smoothed annual growth rate.
- Yield
- Income as a percent of price.