How to use it
- Choose a price path shape, then set the starting price, the number of buys and the change by the end.
- Enter the CAD amount of each buy.
- Enter the percentage fee and any flat fee per purchase.
- Read the average cost, total units and final value.
- Compare with the lump-sum result on the same path, then try another shape.
Why the average cost is a harmonic mean
Buying the same dollar amount each time buys more units when the price is low and fewer when it is high. Your average cost per unit is the total invested divided by the total units, which works out to the harmonic mean of the purchase prices (before fees). The harmonic mean is never above the simple average of the same prices, so with equal-dollar buys your average cost is never higher than the average price on the days you bought.
That is arithmetic, not a market edge. It does not mean averaging earns more than investing all at once; which one ends higher depends on the price path.
Worked example: a V-shaped path
Illustrative inputs: seven buys of $500 with a 0.5% fee on each, while the price falls from $100 to $50 and climbs back to $100.
After $3,500 invested, including $17.50 of fees, you hold 46.765 units at an average cost of $74.84, worth $4,676.50 (+33.61%) even though the price finished where it started. The harmonic mean of the seven prices is $74.47; dividing by 0.995 for the fee gives the $74.84 average cost. The simple average of the prices was $78.57. Putting the full $3,500 in at the first price would be worth $3,482.50.
| Buy | Price | Units bought | Average cost so far |
|---|---|---|---|
| 1 | $100.00 | 4.9750 | $100.50 |
| 2 | $83.33 | 5.9700 | $91.37 |
| 3 | $66.67 | 7.4625 | $81.49 |
| 4 | $50.00 | 9.9500 | $70.53 |
| 5 | $66.67 | 7.4625 | $69.79 |
| 6 | $83.33 | 5.9700 | $71.79 |
| 7 | $100.00 | 4.9750 | $74.84 |
When the lump sum wins
Run the same seven buys on a steady rise from $100 to $150 and the result reverses. Averaging ends at $4,255.69, with an average cost of $123.36, while the lump sum invested at $100 ends at $5,223.75. On a rising path, every later buy pays more.
What averaging mainly reduces is the risk of putting everything in at a bad moment, and the regret that comes with it. Which approach finishes higher depends on a path nobody knows in advance. The calculator's shapes (straight line, V, hump and choppy) are fixed illustrations, not forecasts.
Fees weigh more on small buys
A percentage fee takes the same share of every buy, but a flat fee per purchase weighs heavily on small amounts: a $2 flat fee is 0.4% of a $500 buy and 4% of a $50 buy. The calculator takes both off before converting to units, and the lump sum pays the flat fee only once. Very frequent small buys can lose more to fees than they gain from averaging.
The calculation does not include spreads between buying and selling prices, which some platforms charge instead of an explicit fee. When you compare platforms, check whether they are registered; see regulation.
Canadian tax: average cost and superficial losses
CRA requires identical properties to be tracked at average cost: each purchase updates the adjusted cost base per unit, and sales do not change it. Every buy in an averaging plan is a new entry; the ACB calculator handles this.
Regular buying can also trigger the superficial loss rule. If you sell at a loss and you, or a person affiliated with you, buy the same property in the period from 30 days before to 30 days after the sale, and still hold it 30 days after, the loss is denied and generally added to the cost of the replacement units. An automatic buying plan can trigger this without you noticing; see superficial loss.