Financial Knowledge GuideAverage Down Calculator β Complete Guide
Averaging down means buying more shares when the price drops to lower your average cost basis. A lower average means you need less of a recovery to break even.
Average Cost Formula
New Avg = (Existing Value + New Purchase) Γ· (Existing Qty + New Qty)
Example: Hold 100 shares at $50, price drops to $40. Buy 100 more β new average $45. Break-even drops from +25% to +12.5% needed.
- Check fundamentals: Only average down if the company is still strong.
- Scale in: Don't use all reserves at once β buy in stages.
π‘ Always verify why the price dropped before buying more.