Open stock lots are using FIFO or average cost method?
From what I understand Quicken uses average cost method and has an 'average cost per share'. If you drill down to an open position you see a set of 'open lots' which compose this average sum. When I sold 6 shares of a position, it seems the average cost does not change but Quicken took those 6 shares from one lot only, in fact the lot with the lowest price. I don't know if this is a coincidence but that surely looks a bit like FIFO?
I took each lot and summed it together, and the average cost seems to be roughly equal to the average reported by quicken (but not exactly probably, not sure why, is it because of this fifo vs avg cost method?).
Either way it seems weird that Quicken would remove from the lowest price lot when some shares are sold and still come out with an average cost per share that is accurate. By definition average means that when you sell any sub-set of shares, the average cost does not change, yet the sub-lots that compose the open total position seems to be using a different accounting method than the average total?
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By default Quicken does not use average cost when computing gains and cost basis after a partial sale, it uses FIFO and sells the oldest lot(s) first. You can over-ride this if you want. For accurate tracking, you should the same method your broker used.
There is a Use average cost option for mutual funds.
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How to over-ride this for stocks? Also, the aggregate 'average cost basis per share' column for the total position is also using Fifo, or that is computed differently?
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You over-ride the default lot selection by clicking on the Specify Lots button in the Sell dialog.
After a sale, the average cost per share should be the remaining cost basis divided by the remaining shares. Are you seeing something different?
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I'm seeing no change in the aggregate cost basis per share when some stock is sold, which seems correct. The average does not change if you sell IF it was using average cost method. However, in the individual lot values I am seeing a reduction in the share lot attributed to the lowest cost lot. I am not sure these two figures, the aggregate and each lot-share price are being computed with the same formula. Also capital gains report seems to report average cost method? Btw I'm using Canadian multi-currency Quicken, not sure if it makes a difference.
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The rules may be different for Canada, someone else will have to work in on that.
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If you go into "Edit Security Details, for certain fund types, you can select "Use Average Cost". When you do, it will first give you a warning about switching between methods. It takes a while to complete, but it recalculates every tax lot for that fund.
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As far as I know, the Average Cost method is not selectable for stock funds.
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This site seems to say Canada uses an "Adjusted Cost Basis" which for multi-lot holdings is an average cost basis.
I am not familiar with Canadian Quicken so I do not know how that version works with respect the the screens and comments above. I do know that US Quicken (and the US IRS) allows an average cost basis for mutual funds and perhaps a few select other cases. Even then, when Quicken processes a sale it takes the shares came from the first lot even though for Cap Gain reports it somehow computes an average cost basis. I have never pursued the process sufficiently far to determine how that computation is figured, especially for a case of trading in and out of a mutual fund.
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I didn't notice that we were discussing Canadian Quicken. My apologies.
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