Starting out
Tax lot
Also called Lot
One purchase of a security, tracked separately with its own date and price.
How it works
In systems that track lots, every purchase creates one. A position of 300 shares built over three purchases is three lots, each with its own cost and holding period.
Lots matter because gains, losses and holding periods are computed per lot. Selling the oldest lot and selling the most expensive lot produce different taxable outcomes from the same sale of the same number of shares. Olnest lists separately entered purchases under a position, but does not account for them separately: a sale realises against one pooled average basis rather than a lot you nominate.
Where it misleads people
Systems that show only an average cost hide which lots are underwater. That average is fine for measuring performance and useless for deciding what to sell.
Related terms
- Cost basisWhat you actually paid for a holding, including fees — the number every gain or loss is measured from.
- FIFO and other lot methodsThe rule deciding which purchase you are treated as having sold, when you own several.
- 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.
- PositionEverything you currently hold in one investment, however many separate purchases built it up.
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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.