Next video:
Loading the player...

The term “cost basis” refers to the original value of a security you own. When you sell a stock, bond or mutual fund, you use the cost basis to determine your profit or loss, which in turn affects the amount of tax you owe.
 
Multiple methods can determine one’s cost basis: 1.  First in, first out method or FIFO. 2. Specific identification method 3. Average basis

Related Articles
  1. Managing Wealth

    What Determines Your Cost Basis?

    In any transaction between a buyer and seller, the initial price paid in an exchange for a product or service will qualify as the cost basis. When it comes to securities and related financial ...
  2. Taxes

    Using Tax Lots: A Way To Minimize Taxes

    The method of identifying cost basis can help you to get the most out of reduced tax rates.
  3. Managing Wealth

    Know Your Stock Cost Basis

    Understanding equity cost basis is critical for tracking the gains or losses of an investment.
  4. Financial Advisor

    The Basics of Income Tax on Mutual Funds

    Learn about the basics of income tax on mutual funds, including what types of income may be subject to the capital gains tax rate.
  5. Small Business

    Build Your Small Business During Downswings

    Here we offer some cost-saving measures to strengthen your business even when the market is weak.
  6. Small Business

    Understanding First In, First Out (FIFO)

    A company that uses the first in, first out inventory valuation method will sell, use, or dispose of assets that it produced or acquired first.
  7. Taxes

    Tax Tips For the Individual Investor

    Keep more of your money in your pocket with these seven guidelines.
  8. Investing

    To Sell Or Not To Sell

    Learn some tips on how to exit a position to the best of your advantage.
  9. Trading

    Figuring Out a Stock Investment’s Cost Basis

    An investment’s cost basis is basically the total amount invested, plus any commissions.
  10. Investing

    Hot or Not: Single Stocks in Your Portfolio

    It can be rewarding to invest in well-performing companies, but single stocks can present some downside for your portfolio, too. Here's why.
Hot Definitions
  1. Trumponomics

    Trumponomics is a term for the economic policies of President-elect Donald Trump.
  2. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  3. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
  4. Smart Home

    A convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world ...
  5. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center