Average in the stock market

The art of averaging

Average is a term that one can find in the markets from time to time; What this refers to is the average price paid for a particular share if you had bought shares in that particular company.

To calculate the average price paid for a particular stock, add the total amount you have paid for the stock and divide that by the number of shares you bought in that company.

The answer is the average amount you have paid per share.

Try this math question:

There are five numbers 10, 20, 30, 40, 50

What is the average number?

The calculation:

Add the five numbers: 10 + 20 + 30 + 40 + 50 = 150

Divide the total of the five numbers (150) by 5

150 divided by 5 = 30 (answer)

You can easily do this with a calculator.

There are so many stock trading platforms available these days that investing directly in the stock market has never been easier for the ordinary man and woman.

So how does the average work?

If you buy shares at regular intervals, you will pay different prices for each share because share prices go up and down. Imagine if you bought something at the supermarket last week at full price and then bought the same item this week on a special offer. The average price you paid for the item will be somewhere between the highest price and the lowest price.

The stock market works like this. By buying a particular stock at regular intervals, you will be able to collect some stocks when the price is lower. This is the advantage of saving regularly.

In fact, I think there are reasons to buy more stocks when the price is low. The average price paid per share is determined by calculations as explained above.

The averaging strategy can also be used in cryptocurrency investment.

Bitcoin is more volatile than the stock market, so a canny investor with a good eye can invest when the price has dropped.

There are so many stock trading platforms available that everyone can access the markets. I have joined two of them in New Zealand. Most countries have stock trading platforms available. Signing up for them is easy; you need some form of identification. Just follow the instructions and you are good to go.

TO SUM UP

Playing the markets requires a positive mindset and a cool head. If you have these, you can benefit from the downturn in the markets. Averaging is a method that takes advantage of falling markets.