1. What Is Dollar-Cost Averaging?

Dollar-cost averaging is an investment strategy where an investor divides up the total amount to be invested across periodic purchases of a target asset to reduce the impact of volatility on the overall purchase. The average cost calculation helps determine the effective price per share over multiple transactions.

2. How Does The Calculator Work?

The calculator uses the dollar-cost averaging formula:

Where:

• \( \text{Total Cost} \) — Total amount invested across all purchases (currency)
• \( \text{Total Shares} \) — Total number of shares acquired across all purchases (unitless)
• \( \text{Avg Cost} \) — Average cost per share (currency/share)

Explanation: This formula calculates the weighted average price per share, taking into account all purchases made at different price points over time.

3. Importance Of Average Cost Calculation

Details: Calculating the average cost per share is essential for evaluating investment performance, determining profit/loss, making informed selling decisions, and comparing investment strategies.

4. Using The Calculator

Tips: Enter the total amount invested in currency and the total number of shares acquired. Both values must be positive numbers. The calculator will compute the average cost per share.

5. Frequently Asked Questions (FAQ)

Q1: What is dollar-cost averaging strategy?
A: Dollar-cost averaging involves investing a fixed amount of money at regular intervals, regardless of the asset's price, to reduce the impact of market volatility.

Q2: How does average cost help in investing?
A: Average cost helps investors understand their true cost basis, evaluate performance, and make informed decisions about when to buy more or sell shares.

Q3: Should I include fees in total cost?
A: Yes, for accurate calculation, include all transaction fees, commissions, and other costs associated with purchasing the shares in the total cost.

Q4: Can this calculator handle fractional shares?
A: Yes, the calculator supports fractional shares. Enter the exact number of shares including fractions for precise calculation.

Q5: How often should I calculate average cost?
A: It's recommended to calculate average cost after each new purchase to maintain an accurate understanding of your investment position.