Averaging down is a strategy where investors buy additional shares of a stock after its price has declined, thereby reducing the average cost per share of their position. The idea is that if a stock drops due to short-term market volatility or temporary setbacks, acquiring more shares at the lower price can lower the overall entry point. This creates the potential for improved returns when the stock rebounds, as the investor’s average cost basis becomes lower relative to the eventual recovery price. Essentially, averaging down transforms a single entry price into a weighted average cost, which can be beneficial if the underlying fundamentals of the company remain strong.

However, averaging down is not without its risks. While it can help investors manage emotions during downturns by providing a systematic approach to re-entry, it also exposes them to the possibility of deepening losses if the stock continues to fall. This strategy requires careful analysis of why the stock’s price is declining; if the drop is rooted in deteriorating business fundamentals rather than market noise, further investment could lead to larger losses. As such, investors should use averaging down judiciously, ensuring that they have a clear plan and risk management strategies in place as part of a broader, well-diversified investment approach.

I tried this once before and had a clunky solution that the user had to input all of the data into. This time it will look up the current price and make the calculations and give price points for breaking even, increase by 5%, and increase by 10%.

Stock Average Down Calculator