The volume weighted average price measures the mean cost of your stock investments when multiple purchases are made at different prices. If you were to simply average the different prices paid, you wouldn't be accounting for the fact that different quantities were purchased at different prices. For example, if you purchased 1,000 stock shares at $1 and 10 shares at $49, the average of the two prices would $25. But your true average cost would be drastically different. Knowing your volume weighted average price is useful for stocks because you can quickly figure your gain or loss if you were to sell all of your shares at a given price.
Multiply the number of shares purchased at a particular price by that price to find the amount you paid for each purchase. For example, if you purchased 100 shares of a stock at $50 and 200 shares at $65, multiply 100 by $50 to get $5,000 and 200 by $65 to get $13,000.
Add the amounts paid per purchase together to find the total amount you paid for all of the items. In this example, add $5,000 to $13,000 to find you paid a total of $18,000.
Divide the total paid by the total number of items you bought to find the volume weighted average price. In this example, divide the total paid of $18,000 by the total 300 shares you bought to find the weighted average price equals $60.
- Thinkstock Images/Comstock/Getty Images
- How to Calculate the Average Return on a Portfolio of Stocks
- What Does a Point on the Stock Exchange Mean?
- How to Calculate Market Price Change of Common Stock
- How do I Determine Cost Basis on Stocks?
- How to Calculate Rate Earned in Common Stock
- How to Calculate Returns on Stocks
- What Happens if I Have a Short Position in Shares That Do a Forward Split?
- Stock Split Ratio