Understanding the key differences in investment terminology.
Average cost includes fees, average price does not.
The arithmetic average of the prices you paid for your shares. It's calculated by adding all purchase prices and dividing by the number of transactions.
Your total expenditure (including principal and commission fees) divided by the total number of shares. This weighted average reflects your true break-even point.
For small retail positions with low commission rates, the difference between average price and average cost may only be a few cents per share. However, the gap widens significantly in these scenarios:
Tax authorities require your cost basis to include all transaction fees. Using average price would understate your actual investment and lead to higher capital gains taxes.
If you invested $10,000 including $50 in fees, your break-even isn't when your shares are worth $9,950—it's when they're worth $10,000. Average cost ensures you know your real profit threshold.
Let's compare both methods with a concrete example:
Note: Average price ignores both share quantity and fees, giving you an inaccurate $47.50. The weighted average cost of $47.04 is your true break-even.
Our calculator defaults to calculating Average Cost because it's the more conservative and accurate metric for tax reporting and ROI tracking. However, you can set commission to 0% if you only need a simple average price.
Yes, for any financial decision-making. Average cost gives you the complete picture including all transaction costs, which is essential for accurate tax reporting and profit calculation.
In that case, average cost and weighted average price will be identical. However, remember that 'zero commission' brokers often have other costs like payment for order flow, wider spreads, or SEC fees that still affect your true cost basis.
Absolutely. Cryptocurrency exchanges often charge higher fees (0.1% to 1%+ per trade), and many jurisdictions require detailed cost basis reporting for crypto taxes. Using average cost ensures compliance and accurate profit tracking.
Use our high-precision stock average calculator to get instant results including commissions and averaging down targets.
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