Is it simple math of adding together and dividing by "3" the initial investment amount plus the two averaging down amounts to get the end stock price? OR, is it adding the amount that is invested already with the new averaging down price and dividing by "2"? (hope I didn't confuse anyone).
thanks to you all , I also learnt the concept of averaging
True but if they'd averaged down, like was mentioned above, then they'd likely have more than $500 in the investment. With the larger % gains that we tend to go for over time, commission costs really aren't that much of an issue. They'd be more of an issue for active traders.
Sean, above I was just referring to calculating if an investor has made a profit or not on a particular investment. If the sell price is slightly above the buy price an investor might say they made a small percentage of profit from that position. If other costs like brokerage fees and accounting and more were included in the overall calculations the investor may have in real dollars lost a small amount on the investment. If the investor is buying larger numbers of shares, then the brokerage and accounting fees and taxes may be smaller factors. If the initial cost for a position was $500, and the investor sells for $550, they might think they made 10%. If they include the other fees or costs associated with buying and selling, it could be a smaller profit, or in some cases it might be a loss if the costs exceed $50. If they are investing $10,000 on each purchase the brokerage fees and probably accounting would be small enough to disregard. Is that correct?
I dont know if all brokers do it , but Ameritrade gives all this information when you access your account. Even in their phone app. You might check your brokerage account.