How this number is made
Average cost is the simplest basis: everything you paid, including commissions if you want them in, divided by the shares you still have. It is not a tax-lot method. Specific identification can use a different basis.
- Include commissions in the total if they were part of the cost.
- Shares are the ones you still hold. Sold shares are no longer in either number if you already removed their cost.
Formula
Average cost = total paid ÷ shares.
Worked example
With the figures already in the form, average cost per share is $56.00.
Questions
Is this the basis I must use?
No. For stocks, specific identification or first-in-first-out may apply. Average cost is allowed for some mutual funds. This page is the arithmetic mean of what you paid.
Do reinvested dividends count?
Yes if you include both the dollars and the shares they bought. A reinvested dividend raises both.