Average 10% increase of the market

Investing
#1

Hi all,

Can I ask something about average price of stock vs the 10% rise please? If I buy an ETF for the S&P this year and it cost $60 and carry on buying it next year it’ll cost me $66 right (based on it making 10%)?

So the cost to me is, on average, $63 I’m for those two shares? How do I always make 10% if the price I pay also increases every year? As the market goes up I make more but I also pay more. Is it the result of the increase over time vs the average cost of all those ETFs I buy when I eventually sell them?

Just a mathematical thought that someone asked when I was trying to explain the 10% average gain and I couldn’t answer jt

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#2

Since the market changes daily you could end up buying at $56 or $58.

The market won’t go up every time you buy. Especially if you buy in the past few weeks as stocks are going down currently.

(Keep investing on your own path and don’t chase returns)

**not investment advice :wink:

#3

Hi Matt - thank you for the question!

To your point, assuming the market goes up by 10% every year, your cost basis will go up each year as you keep buying. But, a 10% return on 63 is a bigger number than 10% of 60. And, the beautiful part is that the money you contributed in year 1 will experience compound growth in years 2, 3 and so on!

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