Tax, fees & accounts
FIFO and other lot methods
The rule deciding which purchase you are treated as having sold, when you own several.
How it works
First in, first out treats the oldest shares as sold first. Average cost pools everything into one basis. Specific identification lets you nominate which lot to sell.
The method is often fixed by law rather than chosen: the UK requires pooling with specific matching rules, while US investors can elect specific identification.
Where it misleads people
The method materially changes the tax bill on the same trade. Where a choice exists, making it before selling rather than after is the only time it can be made.
Related terms
- Tax lotOne purchase of a security, tracked separately with its own date and price.
- Cost basisWhat you actually paid for a holding, including fees — the number every gain or loss is measured from.
- Average costTreating all purchases of one security as a single pooled holding at a blended price.
- Capital gains taxTax on the profit made when you sell an investment for more than you paid.
Mentioned in
More in Tax, fees & accounts
- Income tax on investments
- Currency conversion fee
- Platform fee
- Stamp duty
- Tax wrapper
- Withholding tax
- Tax-loss harvesting
- Wash sale
All 11 Tax, fees & accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.