Does cost basis change when you add more money

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thelateinvestor43
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Location: Westbrook, Maine

Does cost basis change when you add more money

Post by thelateinvestor43 » Tue Jan 14, 2020 3:08 pm

I was wondering if cost basis changes when you add more money to a mutual fund. If so, then how do you keep track of what you originally paid for each share, etc?

magicrat
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Joined: Sat Nov 29, 2014 7:04 pm

Re: Does cost basis change when you add more money

Post by magicrat » Tue Jan 14, 2020 3:09 pm

Your average cost basis will change. Though you should just turn on specific ID then you will see the cost basis for each lot.

Gill
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Re: Does cost basis change when you add more money

Post by Gill » Tue Jan 14, 2020 3:10 pm

Yes, it certainly does. The mutual funds now keep track of your basis although many of us do it ourselves, often by Quicken or a spreadsheet.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

DSInvestor
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Re: Does cost basis change when you add more money

Post by DSInvestor » Tue Jan 14, 2020 3:26 pm

Cost basis also changes when if you reinvest dividend and/or capital gains distributions.
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livesoft
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Re: Does cost basis change when you add more money

Post by livesoft » Tue Jan 14, 2020 3:37 pm

I think it is a trick question. The reason is that cost basis apparently can mean different things to different people.

If I use cost basis method of Specific Identification, then the cost basis of the shares bought in a specific transaction DO NOT CHANGE unless there is an adjustment due to a wash sale. If I buy shares the next day or the next month or with dividend re-investment later, then those other shares will have their own cost basis.

Sure, the average price per share will change if I do not pay exactly the same price for every share that I purchase.

If I use Average Cost, then the average price per share will change if I do not pay exactly the same price for every share that I purchase.

Whether one is using a cost basis method of Average Cost or Specific Identification, the total cost of shares purchased will change. If you want to call that "cost basis", then yes cost basis does change when you add more money. However, if you are using a cost basis method of Specific Identification, then the cost basis of previously purchased shares does not change when you add more money.
Last edited by livesoft on Tue Jan 14, 2020 3:38 pm, edited 2 times in total.
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Topic Author
thelateinvestor43
Posts: 402
Joined: Fri Nov 15, 2019 2:02 am
Location: Westbrook, Maine

Re: Does cost basis change when you add more money

Post by thelateinvestor43 » Tue Jan 14, 2020 3:37 pm

Thanks all.

Gill
Posts: 5883
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Does cost basis change when you add more money

Post by Gill » Tue Jan 14, 2020 4:47 pm

livesoft wrote:
Tue Jan 14, 2020 3:37 pm
I think it is a trick question. The reason is that cost basis apparently can mean different things to different people.

If I use cost basis method of Specific Identification, then the cost basis of the shares bought in a specific transaction DO NOT CHANGE unless there is an adjustment due to a wash sale. If I buy shares the next day or the next month or with dividend re-investment later, then those other shares will have their own cost basis.

Sure, the average price per share will change if I do not pay exactly the same price for every share that I purchase.

If I use Average Cost, then the average price per share will change if I do not pay exactly the same price for every share that I purchase.

Whether one is using a cost basis method of Average Cost or Specific Identification, the total cost of shares purchased will change. If you want to call that "cost basis", then yes cost basis does change when you add more money. However, if you are using a cost basis method of Specific Identification, then the cost basis of previously purchased shares does not change when you add more money.
You could have saved a lot of words by just referring to "basis". :happy
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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