# Please can someone explain the reasoning behind how the average share price is calculated?

My average shareprice was ~ÂŁ8.50 per share.

I SOLD 2500 shares at \$12.09

I then BOUGHT 1065 shares at \$11.80

This changed my average share price to ÂŁ7.83

ÂŁ7.83 works out to \$10.89

I couldnâ€™t work out why the shares I bought to average down were \$11.80 how can I have averaged down past that to to \$10.89 dollars?

Freetrade tell me they use a FIFO (first in first out) cost queue which doesnâ€™t make sense to me; or at least doesnâ€™t give me the information I want.

Unless Iâ€™m missing something fundamental - this is actually fairly possible; new to this - I see the price per share as the number of shares I own divided by the amount of money I paid for the shares.

When I sell shares, the PPS should simply take into account the profits/loss from my overall shares in that stock and re-calculate based on that.

What am I missing?

thanks everyone.

1 Like

most likely the result of FX fluctuations. The price GBP/USD when the dealings were executed is likely different from the price when you did your control calculations.

Did you buy all 2500 shares in one deal? Did you buy only 2500 shares before selling 2500 shares?

Itâ€™s the FIFO way of calculating
So the first shares I bought were obviously cheaper.

FIFO is a legal requirement. Courtesy of HMRC

AVCO ÂŁ1.0279069

AVCO ÂŁ1.0396103

Sell 80 shares:

57 shares @ ÂŁ1.00 + 23 shares @ ÂŁ1.05 <=>
<=> 57 + 24.15 = 81.15

Balance:

49 shares @ ÂŁ1.05 + 25 shares @ ÂŁ1.10

FX variable. Absent

3 Likes

I never realised this happened I donâ€™t sell much but this is interesting as I am interested in my long â€śreal termsâ€ť price I pay for my shares. Glad I have a spreadsheet page that doesnâ€™t work on the FIFO principle as it gives a very inaccurate picture of your long term performance on a stock.

For a GIA (correct me if Iâ€™m wrong) this is only in the first 30 days. Stocks after that are lumped in one averaged pool with no distinction between when they were bought or sold (a section 104 holding).

1 Like

I was trying to give a simplified idea of what happens, just a rule of thumb. I think, if I can recall, you mentioned in other posts things may get more complex with the 30 day rule and others. Feel free to fire away

1 Like

Yeah I think for GIA accounts the 30 day rule is meant to simplify things for tax purposes but it does throw in an extra things to calculate if your just trying to verify your own numbers.

Iâ€™m not sure how ISAs are calculated? I assumed it was all just one pile since thereâ€™s no tax implications, but I may be wrong.

Just thought It wrong mentioning in case anyone does calculate it all and still comes up with a slightly different number

1 Like