How the average price is calculated
The average is weighted by quantity, not a simple average of prices:
Average price = total amount invested ÷ total shares
= (q1 × p1 + q2 × p2 + …) ÷ (q1 + q2 + …)
Example: 100 shares at ₹500 and 50 shares at ₹420.
- Invested: ₹50,000 + ₹21,000 = ₹71,000
- Shares: 150
- Average: ₹473.33 — not ₹460, the simple average of the two prices.
At a market price of ₹450, the position shows a loss of about ₹3,500.
How many shares to buy to reach a target average
If you want to bring your average down (or up) to a target price:
Shares to buy = current shares × (current average − target) ÷ (target − buy price)
Using the example: to bring a ₹473.33 average down to ₹460 by buying at ₹450, you need 150 × 13.33 ÷ 10 = 200 shares, costing ₹90,000. Notice how quickly the money needed grows: averaging down is expensive when the buy price is close to the target.
The target must lie between your current average and the new buy price, otherwise it cannot be reached — the calculator tells you when that happens.
Averaging down: tool, not strategy
Averaging down lowers your break-even price, but it also increases your exposure to a stock that has already fallen. Before you buy more, ask:
- Has anything changed in the company's business, debt or management — or is it only the price that has fallen?
- Would you buy this stock today if you did not already own it?
- How much of your portfolio will this one stock become after you buy more?
For long-term investing without picking individual stocks, regular SIPs in diversified funds average your cost automatically — see the SIP calculator.
Costs and tax not included
The calculator uses share prices only. Brokerage, STT, exchange charges, stamp duty and GST add a little to your actual cost, and your contract notes show the true figures. For tax, capital gains are calculated on a first-in, first-out basis: when you sell, the earliest shares you bought are treated as sold first, regardless of your average price. Shares held over 12 months are taxed at 12.5% on gains above ₹1.25 lakh a year; shares held for less at 20%.