Dollar-Cost Averaging: Why Prices Aren’t Averaged
Summary
Hollow Point Trading shares a hypothetical example explaining why equal cash purchases do not produce the simple average of quoted share prices. Investing $100 at $10 buys 10 shares, while another $100 at $5 buys 20, making the cost basis important for understanding an investment’s true average purchase price.
https://youtu.be/dGfhOztRStM
Equal cash purchases do not average the quoted prices #DollarCostAv...
Equal dollar purchases do not give you the simple average of two quoted prices. In this hypothetical example, invest one hundred dollars when a share costs ten dollars. That buys ten shares. Later invest another hundred dollars at five dollars per share, buying twenty more. You have spent two hundred dollars and bought thirty shares. Divide tota...
