Hi, I’m having issues with the value of one of my stocks. I’m just not getting how can they be making a profit when I’ve paid so much more for them.
I am guessing this is because of the FIFO(first-in first out) selling and cost calculation based on that. I just had a quick look, so do your own calculations.
The shares you sell last are the first shares you bought at higher cost. So you keep the shares that you purchased last, at cheeper cost, creating this “profit”.
Ex:
- bought 10 shares in 2023 for 1.2p
- bought 50 shares in 2024 for 1p
- sold 50 shares in 2024 for 1.1p
In theory the shares you own now are the last 10 that you bought in 2024 at 1p, not the ones you sold at a loss.
If the current price is 1.1p you are in profit. I hope that makes sense.
Do your calculation based on the fact that you sell your older shares.
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Thanks, got it.
“In theory the shares you own now are the last 10 that you bought in 2024”
I thought one was meant to run an average buy price for each company. The capital gains is then the difference between the actual selling price and the average buy price.
The “profit” (capital gain) on the shares he has retained is an abstract concept, since the sale price is only determined at the point of sale.
I realise that FILO is the system that Freetrade uses, but for the life of me I don’t see the relevance to the majority of us who have to calculate our capital gains each year the way HMRC stipulate.
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