1. What is Monthly Average Cost Basis?

The Monthly Average Cost Basis is a method of calculating the average price you've paid for your stock investments over a monthly period. It's calculated by dividing the total amount invested by the total number of shares purchased.

2. How Does the Calculator Work?

The calculator uses the monthly average formula:

Where:

• Sum Monthly Costs — Total amount invested in USD during the month
• Sum Monthly Shares — Total number of shares purchased during the month

Explanation: This calculation gives you the average price per share for all purchases made during a specific month.

3. Importance of Cost Basis Calculation

Details: Knowing your average cost basis is essential for tax purposes when selling shares, tracking investment performance, and making informed decisions about when to buy or sell.

4. Using the Calculator

Tips: Enter the total amount invested (in USD) and total shares purchased for the month. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate monthly average instead of per transaction?
A: Monthly averaging simplifies tracking for dollar-cost averaging strategies and provides a clearer picture of your investment timing.

Q2: How does this differ from FIFO or LIFO methods?
A: Unlike FIFO (First-In-First-Out) or LIFO (Last-In-First-Out), the average cost method smooths out price fluctuations over the period.

Q3: Should I include fees in the monthly costs?
A: Yes, for accurate cost basis calculation, include all transaction fees and commissions in your total monthly costs.

Q4: How often should I calculate my average cost basis?
A: Monthly calculation is common, but you may want to calculate it whenever you make significant purchases or before tax season.

Q5: Can I use this for cryptocurrency investments?
A: Yes, the same principle applies to any asset purchased in multiple transactions, including cryptocurrencies.