by ras » Sun Jul 06, 2008 8:58 pm
Thanks for the informative reply, mthadmin! I'll be watching subsequent developments with great interest.
One point of importance: most serious investors do accounting by lots, which isn't FIFO, LIFO, or average cost accounting but something else. Let's take a simplified example. Suppose I've accumulated 300 shares of XXX in the following fashion.
I bought 100 shares of XXX on 4/1/05 at $40 a share.
I bought 100 shares of XXX on 4/1/06 at $80 a share.
I bought 100 shares of XXX on 4/1/07 at $52 a share.
On 4/1/08, I believe I'm overinvested in XXX by 100 shares; besides, my tax bill for 2008 looks really large, so I need to take some tax losses to counterbalance the capital gains I have for this year. The price of XXX on 4/1/08 is $70 a share. If I do as most investors do, it will cost me big time with the IRS. Most investors -- or equivalently, their brokerage services -- will sell using FIFO unless told otherwise. But if I do FIFO, I've got a capital gain of $30 a share or $3,000.
It's not much better with LIFO, which also generates a capital gain of $18 a share or $1,800. And average cost accounting is only slightly better, in this case, than LIFO, for the average cost per share of my 300 shares is $57.33, so I'll still be stuck with a capital gain, in this case $1,267.
A savvy investor, however, will insist, when he sells his 100 shares of XXX on 4/1/08, that the sale come from the lot of XXX shares purchased on 4/1/06. That gives him a taxable loss of $10 per share or $1,000 in total.
Now wouldn't one prefer My Forum 2 to have the capability that savvy investors will insist on, cost lot accounting? The same goes for the ability to handle stock splits as a single manual entry at most. MS Money and Quicken have both these capabilities. Failing these capabilities, personal finance software can usefully handle bank accounts and charge cards, but not investments.
ras