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David, could you please explain why stocks average cost would change?
Posted: Thu Nov 28, 2024 4:19 am
by foran
David,
I'm very confused that average cost change every time when sell ?
Could you please explain why stocks average cost would change ?
Do your securities firm change your average cost all the time ?
so, they makes you confused about your actual cost, too ??? 
Relative Post
viewtopic.php?t=9963
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Nov 28, 2024 5:47 am
by anjali
the average cost you see in your portfolio is the average price you did pay for stocks bought from public shareholders (unfortunately it doesnt take into account any stocks you bought/sold outside the market via a tender) and it does change when you buy and sell without this calculation the game wouldnt be able to tell you how much profit/loss you made on the particular stock.
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Nov 28, 2024 7:20 am
by foran
I'm talking about " AVERAGE COST " , ok ? not profit ! thank you.
should average cost changes after sell you stock shares ?
Chat GPT's answer :
No, the average cost of your stock shares does not change after you sell them. The average cost is based on the purchase prices of the shares you currently own. Once you sell shares, they are no longer part of your holdings, so the average cost calculation only applies to the shares you still have. If you buy more shares in the future, you would then recalculate your average cost based on the new total number of shares and their purchase prices.
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Nov 28, 2024 11:19 am
by anjali
of course the average price will drop if i sell shares for higher then what i ve paid for ... i do have plenty negative prices in my average stock price and this wouldnt be possible if the average price would stay unchanged when selling shares, and it would make the whole average purchase price pointless as it would be always displaying wrong
no idea where you got this text from, you posted there in Black frame, but its not true, the average price is always calculated on your average buy/sell
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Nov 28, 2024 12:19 pm
by cantdownloadit
the average cost price shouldn't always change though.
if i buy 5% of the shares in a company in one go for $20 each and never buy any more, the average cost would always be $20.
If i then sell half those shares, the average cost is still $20 per share for those i have remaining.
The only time i would expect the average cost to change is if i bought various amounts of shares at different prices, as each time i bought and sold then i would expect the average cost to change as a combination of the differing purchase prices and depending on the value of the shares i sold.
Its possible this is some form of rounding/simplification used by the game so, or equally it could just be unclear wording whether its referring to average cost of the shares, or as i presume from this, the average cost based on all your transactions with those shares.
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Nov 28, 2024 12:34 pm
by anjali
the avg shareprice does only change when you buy or sell shares to reflect the real purchase costs of the shares
if you buy 10.000 shares at 10.00 thats 100.000 ... avg price shown 10.00
now you sell later 5.000 shares at 15.00 thats 75.000 ... remaining 25.000 for 5.000 shares
the avg shareprice in the game will now show 5.00 per share
so the avg share orice does drop on selling, you can follow that up if you place every buy/sell in a spreadsheet and it will match the game data. else you would never get to negative avg purchase price and it wouldnt match the spreadsheets (there are actions not taken into account for avg shareprice like buy/sell shares directly with an AI person / AI company outside the stock market or issue shares to the parent company, or IPO)
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Nov 28, 2024 1:05 pm
by foran
Hello, bro.
I'm literally talking about " AVERAGE COST " NOT Gain/Loss,
It'll only relate to Purchase price,
and shouldn't relate to Sell price.
May I ask you,
have you been actual buy stock shares in real world ??
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Dec 05, 2024 1:40 pm
by David
The display actually shows the average net cost of the stocks, not the average purchase cost.
When there is a sale of shares in the portfolio, the proceeds from the sale would reduce the net cost accordingly.
You can use the following prompt to ask AI and you should be able to get a correct answer:
"How is the net cost of a stock portfolio calculated? Is it true that when there is a sale of shares in the portfolio, the proceeds from the sale would reduce the net cost accordingly. Please give an example."
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Dec 05, 2024 1:42 pm
by David
The display actually shows the average net cost of the stocks, not the average purchase cost.
When there is a sale of shares in the portfolio, the proceeds from the sale would reduce the net cost accordingly.
You can use the following prompt to ask AI and you should be able to get a correct answer:
"How is the net cost of a stock portfolio calculated? Is it true that when there is a sale of shares in the portfolio, the proceeds from the sale would reduce the net cost accordingly. Please give an example."
Below is an answer I got from GPT4 using the above prompt:
---
How is the Net Cost of a Stock Portfolio Calculated?
The net cost of a stock portfolio refers to the total amount an investor has paid to acquire the stocks in the portfolio, adjusted for any proceeds from sales or other transactions. This is a dynamic value, as it changes when shares are bought or sold.
When shares are purchased, the cost of the purchase (price of shares + any transaction fees) is added to the net cost. Conversely, when shares are sold, the proceeds from the sale (sale price - transaction fees) are subtracted from the net cost. This ensures that the net cost reflects the actual investment remaining in the portfolio.
True or False: Do Sale Proceeds Reduce the Net Cost?
Yes, this statement is true. When shares are sold, the proceeds from the sale reduce the net cost of the portfolio because the investor is "recouping" part of the initial investment.
---
Example
Let’s go through an example to illustrate:
Step 1: Initial Purchase
- An investor buys 100 shares of Stock A at $50 per share.
- Transaction fee: $10.
Net Cost Calculation:
- Total cost = (100 × $50) + $10 = $5,010.
- Net cost of portfolio: $5,010.
---
Step 2: Additional Purchase
- The investor buys an additional 50 shares of Stock A at $60 per share.
- Transaction fee: $5.
Net Cost Calculation:
- Total cost of new purchase = (50 × $60) + $5 = $3,005.
- New net cost of portfolio = $5,010 (previous net cost) + $3,005 = $8,015.
---
Step 3: Sale of Shares
- The investor sells 80 shares of Stock A at $65 per share.
- Transaction fee: $8.
Proceeds from Sale:
- Total proceeds = (80 × $65) - $8 = $5,192.
Net Cost Adjustment:
- New net cost = $8,015 (previous net cost) - $5,192 (sale proceeds) = $2,823.
---
Key Takeaways
1. Buy shares → Add the purchase cost (including fees) to the net cost.
2. Sell shares → Subtract the proceeds (after fees) from the net cost.
3. The net cost reflects the remaining investment in the portfolio after accounting for all transactions.
This method allows investors to track their actual financial commitment to the portfolio over time.
Re: David, could you please explain why stocks average cost would change?
Posted: Thu Dec 05, 2024 6:17 pm
by foran
David wrote: Thu Dec 05, 2024 1:42 pm
The display actually shows the average net cost of the stocks, not the average purchase cost.
When there is a sale of shares in the portfolio, the proceeds from the sale would reduce the net cost accordingly.
You can use the following prompt to ask AI and you should be able to get a correct answer:
"How is the net cost of a stock portfolio calculated? Is it true that when there is a sale of shares in the portfolio, the proceeds from the sale would reduce the net cost accordingly. Please give an example."
Below is an answer I got from GPT4 using the above prompt:
---
How is the Net Cost of a Stock Portfolio Calculated?
The
net cost of a stock portfolio refers to the total amount an investor has paid to acquire the stocks in the portfolio, adjusted for any proceeds from sales or other transactions. This is a dynamic value, as it changes when shares are bought or sold.
When shares are
purchased, the cost of the purchase (price of shares + any transaction fees) is added to the net cost. Conversely, when shares are
sold, the proceeds from the sale (sale price - transaction fees) are subtracted from the net cost. This ensures that the net cost reflects the actual investment remaining in the portfolio.
True or False: Do Sale Proceeds Reduce the Net Cost?
Yes, this statement is
true. When shares are sold, the proceeds from the sale reduce the net cost of the portfolio because the investor is "recouping" part of the initial investment.
---
Example
Let’s go through an example to illustrate:
Step 1: Initial Purchase
- An investor buys
100 shares of Stock A at
$50 per share.
- Transaction fee:
$10.
Net Cost Calculation:
- Total cost = (100 × $50) + $10 =
$5,010.
- Net cost of portfolio:
$5,010.
---
Step 2: Additional Purchase
- The investor buys an additional
50 shares of Stock A at
$60 per share.
- Transaction fee:
$5.
Net Cost Calculation:
- Total cost of new purchase = (50 × $60) + $5 =
$3,005.
- New net cost of portfolio = $5,010 (previous net cost) + $3,005 =
$8,015.
---
Step 3: Sale of Shares
- The investor sells
80 shares of Stock A at
$65 per share.
- Transaction fee:
$8.
Proceeds from Sale:
- Total proceeds = (80 × $65) - $8 =
$5,192.
Net Cost Adjustment:
- New net cost = $8,015 (previous net cost) - $5,192 (sale proceeds) =
$2,823.
---
Key Takeaways
1.
Buy shares → Add the purchase cost (including fees) to the net cost.
2.
Sell shares → Subtract the proceeds (after fees) from the net cost.
3. The net cost reflects the remaining investment in the portfolio after accounting for all transactions.
This method allows investors to track their actual financial commitment to the portfolio over time.
Is average net cost of stocks possible to go minus ?
The average net cost (or cost basis) of stocks in a portfolio cannot go below zero. The average cost basis is calculated based on the total amount you have invested in the stocks divided by the number of shares you own. Here’s how it works:
### Average Cost Basis Calculation
1. **Total Investment**: This is the total amount of money you have spent to purchase the shares, including any commissions or fees.
2. **Number of Shares**: This is the total number of shares you own.
### Formula
The average cost basis is calculated using the formula:
\[
\text{Average Cost Basis} = \frac{\text{Total Investment}}{\text{Number of Shares}}
\]
### Example
- **Purchase 1**: Buy 10 shares at $50 each:
Total Investment = 10 × $50 = $500
- **Purchase 2**: Buy 5 shares at $100 each:
Total Investment = 5 × $100 = $500
- **Total Investment**: $500 + $500 = $1,000
- **Total Shares**: 10 + 5 = 15 shares
- **Average Cost Basis**:
\[
\text{Average Cost Basis} = \frac{1,000}{15} \approx 66.67
\]
### Can It Go Negative?
- **Negative Average Cost Basis**: The average cost basis cannot go negative because you cannot have a negative investment. Even if the market value of the stocks drops significantly, the average cost basis remains a reflection of what you paid for the shares.
- **Realized Losses**: If you sell shares for less than your average cost basis, you will realize a loss, but this does not affect the average cost basis itself. It simply reflects the performance of your investment.
### Conclusion
In summary, the average net cost (or cost basis) of stocks cannot go below zero. It is a measure of your investment in the shares, and while the market value of those shares can fluctuate, the cost basis remains a positive value based on your actual purchases.
So, is it a bug when it goes negative ?