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Average Price

Average Price refers to the mean price of a security over a specified period, considering all the different prices at which it was bought or sold. Average price can be calculated in various ways, such as taking the sum of all the prices paid for a security and dividing it by the number of transactions. This measure is useful for evaluating investment performance, planning future trades, and understanding the historical pricing of a security.

Example

Suppose an investor buys 100 shares of a stock at $50 per share, then buys another 100 shares at $60 per share. The average price paid for the 200 shares would be $55.

Key points

• Represents the mean cost of a security based on all purchase prices.

• Useful for evaluating the overall performance of an investment.

• Helps investors decide whether to buy, sell, or hold based on current market prices relative to their average cost.

Quick Answers to Curious Questions

It helps investors assess whether they are making a profit or loss compared to their cost basis and can guide decisions on buying more, selling, or holding.

By adding all the prices paid for the security and dividing by the total number of shares purchased.

If the current price is above the average price, the investment is in profit, whereas if it is below, the investment might be at a loss.