+1Spec ID. Best way to control gains and losses if your purchases were at variable prices.
No. The only thing close to this is that non-covered shares are sold before covered shares, but that's not what FIFO means, especially WRT to covered shares that VG is asking about.BTW, Average Cost means shares are sold First-In, First-Out.
Also, only Canadians can figure out their average basis. In the US, most investors simply let the mutual fund company do it for them because anytime one sells shares or buys more shares, then the per-share basis of previously-owned shares changes.Average basis method illustrated. Table 4-2 illustrates the average basis method of shares sold, compared with the use of the FIFO method to figure cost basis (discussed earlier).
Even though you include all unsold shares of identical stock in an account to compute average basis, you may have both short-term and long-term gains or losses when you sell these shares. To determine your holding period, the shares disposed of are considered to be those acquired first.
... unless one creates wash sales which means the basis of shares left in the account are adjusted for the disallowed loss.With FIFO and Specific ID, the cost basis of any shares bought is the price paid for them which means the per-share basis doesn't change in mysterious ways.
Use specific ID if it is a taxable account. That will make it much easier for you to control capital gains and losses. If it is a tax deferred account, it probably doesn't matter as much.
... unless one creates wash sales which means the basis of shares left in the account are adjusted for the disallowed loss.
Don't ask me how a wash sale messes up Average Basis. I wouldn't even know how to begin to do those calculations.
Can any of you explain what "cost basis" you chose to use. On Vanguard Act., your choices are
Average cost
First In First Out
Specific ID
Which do you prefer and why?
They do, they just don't show it to you. They have always provided me with average cost for non-covered share sales. If you want to use something else for non-covered (bought before 1/1/12) mf shares you have to track it yourself. Maybe there was a time when they didn't do this, and almost certainly not for shares transferred in, but I've been with them ~20 years and they've always had it..
Edit to add: Vanguard doesn't have a complete history of your costs. So you still might need to have records of every share purchase / sale (including dividend reinvestments) to use Specific ID.
They do, they just don't show it to you. They have always provided me with average cost for non-covered share sales. If you want to use something else for non-covered (bought before 1/1/12) mf shares you have to track it yourself.
Since the OP was asked by VG, these are obviously covered shares, because they do not ask for non-covered shares.
But what if you had bought 1000 times and sold 50 times over the last 10 years. Is the math still simple?For example, if I've made 1,000 purchases over time at all different prices with an average cost of $100 and then I buy 1000 new shares at $200, my new average cost is $150. The math is simple.
But what if you had bought 1000 times and sold 50 times over the last 10 years. Is the math still simple?
With specific id, it doesn't matter how many times I've bought and sold. There is no math at all. I just decide which shares to sell and look up the cost I paid for them. That is my cost basis.
I'm looking at a 2012 1099-B and for a sale of VTSAX during the year, it shows a purchase date of 9/26/2006. They also have to keep track of when shares move from ST to LT cap gains/loss. I think they kept all the transaction data, but they just didn't externalize it or let you specify which shares you were selling and report it that way.
In fact I can see a 10 year history. Maybe for shares held longer than that they just kept the average. Maybe.
Here is how we did it before personal computers were invented:Computers make that bookkeeping easy today (provided you have good, non-Quicken, financial software ) but it used to be a huge P.I.A. So much so that Vangaurd didn't even do it for individual investors until they were told they had to beginning in 2012 (I think).
....How did folks using Specific I.D. manage their cost basis when Vanguard promoted a fund you own from Individual Investor Shares to Admiral? They're different funds with different tickers and different NAVs. ...