Incorrect Calculation of Average Cost per share

I have notice that the Average cost per share for a particular STOCK as your system calculates does not consider current holdings but averages all shares bought even though some shares in that stock have been sold. Hence the performance gains figures on a per stock basis will be incorrect. I believe that only existing stock holdings that are not sold should be used to calculate Average cost of shares per stock should be reported! Do you agree?
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  • Hi Vincent,

    The average cost per share figure does relate only to the currently held shares.

    Please note that for the performance calculation purposes a pro-rata (average) sale allocation method is used. This differs from the specific sale allocation method that may be set for CGT reporting.

    Here's a quick examples as to how the calculation works:

    Consider the following trades:
    1/1/2011 Buy 1000 shares @ $1
    1/1/2012 Buy 1000 shares @ $2
    1/1/2013 Sell 1000 shares @ $3

    Looking at just the buy trades, the average cost per share is $1.50. Because the sell trade is allocated evenly from each buy packet the average per share of the currently held shares remains unchanged after the sale (from a performance reporting perspective).

    If the trades occurred in a different order, eg:
    1/1/2011 Buy 1000 shares @ $1
    1/1/2012 Sell 1000 shares @ $3
    1/1/2013 Buy 1000 shares @ $2

    In this case the average cost per share would be reported as $2 as only the $2 shares remain as currently held shares.

    Hopefully that makes sense but if you think that there's something that doesn't look right in your portfolio we are happy to take a look.
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  • I’m Confused
    This reply was created from a merged topic originally titled
    Can't understand this particular avg cost per share.


    Hi Support, Can you help explain how you arrive at the Av cost/share of $2.078 for this stock (http://cmc.sharesight.com/holdings/34...?

    I have the CGT calculation at Sharesight Minimisation. Not sure if that contributed to the reason. Although in my own calculation, the average cost should be $1.998 per share inclusive of brokerage.
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  • Another example of Average Cost calculation:

    buy 100 @ $50
    buy 200 @ $55
    sell 50 @ $whatever
    sell 80 @ $whatever

    total buy 100+200=300 units
    total sell 50+80=130 units
    remaining 300-130=170 units

    both sale using average method reduces 1st buy to
    100-130*100/300=56.67 units

    both sale using average method reduces 2nd buy to
    200-130*200/300=113.33 units

    average cost = (56.67*$50+113.33*$55)/170= $53.33

    Note: At the moment, Sharesight don't take brokerage into consideration in average cost calculation.
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  • Will sharesight offer the option of taking brokerage into consideration in the average cost calculation in the foreseeable future?
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  • Hi Scott,

    I have just stumbled upon this problem with the average price calculation and have been directed here..I think it is very important to have accurate reporting that I can rely on to show me the correct information.

    Where you said that for the performance calculation purposes a pro-rata (average) sale allocation method is used, which differs from the specific sale allocation method that may be set for CGT reporting...

    Is it necessary to be different? It seems to me that this problem could easily be eliminated by either:

    1. Adding a section in the sale dialog popup that records which parcels are sold, and that data goes straight into the generated CGT report. This would then also automatically update the average price. Or,

    2. Allowing editing of the average price.

    I would much prefer the first, as it would give a true reflection of sale allocations and returns. But most importantly I want to be able to rely on the information that is calculated automatically.
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  • I’m frustrated
    Why isn't FIFO used for these calculations as this is the most commonly accepted method for treating share parcels?
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  • Dan,

    FIFO is an option in our capital gains reports. Depending on tax rules in your country, other options can also be used for capital gains reporting, which may be more advantageous than using FIFO

    For performance calculations, the selection of which parcels to sell does not change the performance of your portfolio. Selling the cheapest parcel first, for example, would merely increase the average cost of your remaining shares.

    More on performance calculations can be found in our help section.

    Hope that helps

    Andrew Bird
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