How the average price is calculated
Average price = total amount invested ÷ total number of shares. For example, 100 shares at ₹500 and 50 shares at ₹420 cost ₹71,000 for 150 shares, an average of ₹473.33.
Averaging down
To bring your average to a target price T by buying more at the current price P (when P is below T), the number of extra shares needed is:
Shares = current shares × (current average − T) ÷ (T − P)
The closer your target is to the current price, the more shares (and money) you need — averaging down to exactly the market price is impossible.
Should you average down?
- Averaging down lowers your break-even price, but it also increases your exposure to a stock that has fallen.
- It can make sense for fundamentally strong companies during temporary market falls — not for businesses with deteriorating prospects.
- Set a limit on how much of your portfolio any single stock can be.
Selling? Estimate your tax with the capital gains tax calculator. For long-term investing, compare with a mutual fund SIP.
For information only — not investment advice. Brokerage, STT and other charges are not included.