Question 1

How do you calculate the average cost of a stock?

Accepted Answer

Add up the total dollars spent across every purchase (shares × price for each buy), then divide by the total number of shares acquired. If you bought 10 shares at $100 and 15 shares at $120, your total cost is $1,000 + $1,800 = $2,800 across 25 shares, so your average cost is $112 per share. This blended per-share cost is the price the market must reach for you to break even on the whole position, ignoring taxes and fees.

Question 2

What is cost basis in investing?

Accepted Answer

Cost basis is the total amount you paid for an investment, including purchase price and typically any commissions or fees. It's the anchor the IRS uses to calculate capital gains or losses when you sell — sale proceeds minus cost basis equals your realized gain. For stock accumulated across multiple purchases, cost basis is tracked either lot-by-lot (specific identification) or as a single average across all shares, depending on the method your broker uses.

Question 3

FIFO vs average cost — which cost basis method should I use?

Accepted Answer

FIFO (first-in-first-out) assumes the oldest shares are sold first, which usually maximizes long-term capital gains and can be tax-efficient if your oldest lots are also your cheapest. Average cost blends every purchase into one basis and is simpler to track, and is the default for mutual funds in most US brokerages. Specific identification lets you pick exactly which lots to sell, giving the most tax flexibility. For most individual-stock investors, specific ID is optimal; average cost is fine for straightforward portfolios.

Question 4

How do I find the cost basis on old stock purchases?

Accepted Answer

Start with your broker — most US brokers track cost basis automatically for shares acquired after 2011 (2012 for mutual funds) and report it on Form 1099-B. For older purchases, dig through statements, confirm slips, or transfer paperwork. If records are truly lost, you can estimate using the earliest known price and adjust for every split, spin-off, and dividend reinvestment since. When all else fails, the IRS allows a $0 cost basis, which maximizes your tax bill — a strong incentive to reconstruct actual records.

Question 5

Do stock splits change my cost basis per share?

Accepted Answer

Yes on a per-share basis, no in total. A 2-for-1 forward split doubles your share count and halves your per-share cost basis; a 1-for-10 reverse split does the opposite. Your total dollar cost basis is unchanged. When entering historical purchases into an average-cost calculator, either use split-adjusted prices for every buy or use our Stock Split Calculator first to convert old lots so all rows are on a consistent split-adjusted basis.

Average Cost Calculator

How it works

Frequently asked questions

Related calculators

Never Miss a Stock Split Again