Why Track Your Portfolio Average Cost
Understanding your average cost of shares is crucial for making informed investment decisions. It helps you:
- Calculate actual profit/loss accurately
- Plan tax-saving strategies
- Make better buy/sell decisions
- Track portfolio performance
Two Main Methods
1. Weighted Average Method
This method calculates the average cost of all shares you own, weighted by the number of shares in each purchase.
Formula: Total Cost / Total Quantity
2. FIFO Method (First-In-First-Out)
Assumes that the first shares you bought are the first ones you sell. This method is important for tax calculations in India.
Example Calculation
Purchase 1: 100 shares @ ₹50 = ₹5,000
Purchase 2: 50 shares @ ₹60 = ₹3,000
Total: 150 shares for ₹8,000
Weighted Average: ₹8,000 / 150 = ₹53.33 per share
Managing Multiple Transactions
For investors with frequent trades, tracking average cost manually becomes complex. Key considerations:
- Record every buy/sell transaction with date and price
- Include brokerage fees in your cost calculation
- Keep track of corporate actions (splits, bonuses)
- Maintain separate records for long-term and short-term holdings
Tools to Help
Use our Share Average Calculator to automatically track your portfolio and calculate:
- Weighted average cost
- FIFO-based realized P&L
- Unrealized gains/losses
- Transaction history with CSV export
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