Why it's useful Knowing the weighted average price you paid for each share of stock can help you determine how your investment is performing as a whole, relative to the current share price.

Key Points To calculate a price-weighted average, sum the stock prices and divide by the number of stocks. This average reflects changes in higher-priced stocks more than lower-priced ones.

Calculate annual return: Adjust purchase price for splits, then annualize simple return. Dividends can be included by using dividend-adjusted prices in return calculations.

Most investors never buy an entire allocation to a stock in one purchase. Instead, many investors choose to ease into a position. Some might dollar-cost average into a stock by investing a set ...

Average cost: This method calculates the average cost of all the shares you own and uses that average to calculate gains and losses. It’s commonly used for mutual funds.

The Treasury Stock Method is a widely used accounting technique that helps companies calculate the potential impact of outstanding stock options and warrants on their earnings per share (EPS).

The average cost basis method is a system of calculating the value of mutual fund positions in a taxable account to determine profit or loss for tax reporting.