$ qubo learn portfolio/04

Cost basis methods: FIFO and others

When you sell part of a position bought at different prices, a cost basis method decides which purchase price applies to the sale.

FIFO (first in, first out) uses the oldest purchases first. LIFO (last in, first out) uses the most recent. Average cost applies the weighted average of all purchases.

The method changes the realised gain. If prices rose over time, FIFO assigns the cheapest purchases first and shows a larger gain than LIFO for the same sale.

Which methods are allowed depends on the country and sometimes on the asset. The local tax rules decide; this lesson only explains how the methods work.

// rule to remember

// your turn

Find an asset you bought at different prices and calculate a hypothetical sale with FIFO and with average cost.

Educational content only. Not investment advice. Past data does not predict future results. Risk disclosure