Replies to post #5913 on A.I.M. Users Bulletin Board (AIMUSERS)

[Qarel]

Hello Lou, I really wouldn't know. I would be suprised however if Newport, or for that matter any AIM software package, would show average share price. AIM is constructed on a Last-In-First-Out basis, and the conventional way to calculate average share price is on a First-In-First-Out basis. Average share price is just meaningless for AIM. Remember: it is just a metric! It is not an essential quality of your holding.

There is an amusing way to calculate avergage share price in AIM. Take Initial Investment (cash+equity) - Current Cash Reserve. That's is the amount of money that you spent on equity. Divide by the number of shares. Some people don't like this, as all your profits lower the average share price, and may even lead to negative 'average' prices.

Regards,

Karel

[PDAH]

I dont Believe that newport shows the average cost. But it is very simple to calculate. Divide the stock value by the shares owned that will give you an average price per share.

Pete

[OldAIMGuy]

Hi Lou, There's a way to do it using information from Newport,
but it doesn't do it automatically. The way that comes to mind
is from the PRINT menu. Print the trade history of the
stock/fund in question. At the top of the page, write in your
initial investment in shares at the price you started.

From that information you should be able to calculate the
average cost per share of your holdings. Note that when you sell
shares in this type of calculation, you are selling "average"
shares only.

Let's say you have 1000 shares at $10 ea. as your starting point.

 
 DATE   Shares     Price   Shares   Price   Total   Total     Ave.Cost/Share    
        Purchased          Sold             Owned    Cost 
 01/00  1000       $10.00    0              1000    $10,000      $10.00 
 02/00   100       $ 7.00    0              1100    $10,700      $ 9.73 
 03/00     0                100     $11.00  1000    $ 9,730      $ 9.73 
 04/00   200       $ 6.50    0              1200    $11,030      $ 9.19 
 

Over time you will see average cost per share changing with all
purchase transactions, but not with sale transactions. You use
the previous total cost plus the additional expense of the newly
purchased shares to come up with a new total expense. Then you
divide by the new total number of shares to come up with the new
average cost.

In a steeply rising cyclical pattern you'll actually see the
average cost rise. You will be selling shares of one average
cost, but possibly be buying back shares at a higher cost than
your average. Don't worry about this, the math is correct.

You can build a simple spreadsheet of this activity and the
calculations. It is handy to have the computer do the calcs. for
you. Hope this helps.

Best regards, Tom

[Jerry S]

Hi Lou

I don't run Newport, but I've created my own spread sheet using Mr Lichello formula. All the columns are there but in differenc places (makes more sense to me). I also calulates the average cost per share. Been testing it with Mr L. data and found that I yeld about 10 to 12 % increase. If your interested e-mail me ([e-mail])

Jerry S.

[Conrad]

Hi Lou,

Your Question trigged a lot of activity! In my reply to Qarel I forgot to mention that my Windows Vortex Program calculates the Time Averaged Simple Investment and then this is used to calculate the Annualised Yield:

http://home.hccnet.nl/c.kruidenier/vortexus/vortex.html#Translation

The program also gives the Accumulated Investment(Account Window) as per

Iacc=(I1+I2+I3...etc) with the withdrawals being negative investments. This can easily be divided by the number of shares you have and this give the average purchase price. By adding the Accumulated Trade Cost(and other cost components) you get a more realistic Cost/Share.

With the Excel Vortex Spread Sheets, that you originally made up for me, I do essentially the same. I have added columns for trade costs, account cost, interest earnings, etc., and then I can calculate any type of average I want. I have even, at times, used Trading Cost as the average investment that creates the Extra Yield beyond the Buy and Hold Yield. This gives you a powerful metric(as Qarel calls it) to compare the AIM Annualised Profit(AAP) relative to the Buy and Hold Annualised Profit(BHAP):

(AAP-BHAP)/(Extra Trading Cost)*100%

If this is negative over the long run you are doing something wrong! This formula also shows, very powerfully, the very high leverage effect of the small additional trade cost investment.

How many ways you want to know how to skin the AVERAGE CAT?


Conrad