General Stock Investment Strategies/Break Even Stock Price

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Question
Hello:

How is the break even price determined for multiple stock or  exchange traded fund purchases for the same company or for the same ETF?

For example, an investor purchases 100 shares of XYZ company for $50.25/share and another 75 shares for $50.10/share and another 50 shares for %50.00/share.  The buy and sell commission is $10.00. What is his break even sale price for the 225 shares and how is it determined?

For the first hundred shares it would be 100 shares X $50.25/share + $10.00 to buy + $10.00 to sell divided by 100 shares.

$5025 + $20.00 divided by 100 shares = $5045/100 = $50.45, break even price; however, I am not sure that this is correct.
If the investor buys 75 more shares and 50 more shares of XYZ company at the prices indicated above, what then is the break even price?

I thank you for your reply.

Answer
Kenneth,

Your break even is at whatever price it takes to make your money back.  

You add all of the money needed to buy shares + commissions.  This equals your cost basis.

When your sales proceeds ((shares x price) - commissions)) - your cost basis equals zero, you at the break even value.  Then take the sales proceeds and divide it by the number the shares to get a break even price.

I hope this helps.

Michael

General Stock Investment Strategies

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Michael Weiss, CFA

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I can answer most questions about stock investment strategies, especially those related to value and growth

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