Being the financially responsible person you are, you decide to invest some spare money. So you bought a bunch of stocks, and then you bought stocks at a different price again. Sometime later, you bought additional stock with the extra money you got from your grandma.
Now, you own some stock, but because you bought the stock at different times and different prices, you wonder how much profit you made based on the current price.
Worry not. We got your back 😉
A cost basis calculator is a tool for determining the average stock value of your investments. This is important for calculating capital gains or losses when you sell the investment.
How To Use Cost Basis Calculator
Using a cost basis calculator is simple. You enter the purchase price and quantity into the calculator, which automatically calculates your cost basis. The calculator works with up to three stock purchases.
Calculating Stock Average Formula
There are several methods for calculating the stock average. The most common one is the simple average method, which involves adding up the cost basis of all shares and dividing by the total number of shares. Another popular method is the weighted average, which considers the number of shares purchased at different prices.
The weighted average method is the method used in our calculator.
Methods of Calculation
To calculate the stock average using the simple average method, use the following formula:
Stock Average = Total Cost Basis / Total Number of SharesFor example, if you bought 100 shares of a stock at $10 per share and 50 shares at $15 per share, the total cost basis would be $1,750 ($1,000 + $750). The total number of shares would be 150 (100 + 50). Therefore, the stock average would be $11.67 per share ($1,750 / 150).
To calculate the stock average using the weighted average method, use the following formula:
Stock Average = (Price of 1 Share Purchase x Number of Shares 1 + Price of 2 Share Purchase x Number of Shares 2 + ... + Price of N Share Purchase x Number of Shares N) / Total Number of SharesFor example, if you bought 100 shares of a stock at $10 per share and 50 shares at $15 per share, the stock average would be $11.67 per share (($10 x 100 + $15 x 50) / 150)).
Adjustments to Cost Basis
Sometimes, you may need to adjust your cost basis to account for certain factors, such as dividends, stock splits, or commissions. To adjust your cost basis, use the following formula:
Adjusted Cost Basis = Original Cost Basis + AdjustmentsFor example, if you bought 100 shares of a stock at $10 per share and paid $50 in commissions, your adjusted cost basis would be $1,050 ($1,000 + $50).
Calculating Stock Profit/Loss
Now that you know your cost basis, let’s determine how much money you have made 🤑. First, you need to check the current price of your stock and use the following formula:
Stock Profit = (Current stock price - Cost basis) x number of sharesExpanding on our previous example, let’s say the stock is worth $20 per share. The total profit in this case is $1,250 (($20 – $11.67) x 150).
Great, let’s add a cherry on top and translate this into profit percentage because we all love percentages for no reason.
Profit percentage = ((Current stock price - Cost basis) / Cost basis) x 100Translating the formula, our profit is beautiful 71.43% ((($20 – $11.67) / $11.67) x 100).
By understanding the cost basis and using our cost basis calculator, you can accurately calculate your investment gains and losses and make informed decisions about buying and selling assets.