Formula for Calculating Price per Share

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Formula for Calculating Price per Share

With the following handy formula, you can compare what you would have paid per share using different investment strategies. This is the formula used to compare the results of buying a fixed number of shares per month to purchasing a fixed dollar amount of shares per month.

Price per share

You can determine your average price per share (what you paid) with this formula:

If you purchased the same number of shares of an investment each month over several months, you would pay more per share than if you had invested that same total amount of money divided equally over the same number of months. The reason? You would actually buy more shares using the dollar cost averaging method.

What it boils down to

Dollar cost averaging is a method of investing that may help reduce the risks of market timing by investing a fixed amount at regular intervals. When prices are low, your investment purchases more shares. When prices rise, you purchase fewer shares. Over time, the average cost of your shares will usually be lower than the average price of those shares. It does not assure a profit or protect against losses in a declining market. However, over longer periods of time it can be an effective means of accumulating shares. Investors should consider their ability to continue investing through periods of low market prices.