Few days before, I came across a forum in which someone started a thread that he selected average cost basis method, what is it? Can someone give me a detailed explanation? As I am a newbie in stock market, so any answers will be appreciated.
You can figure out your gain or loss using an average basis only if you acquired the shares at various times and prices, and you left the shares on deposit in an account handled by a custodian or agent who acquires or redeems those shares.
To figure average basis, you can use one of the following methods.
• Single-category method.
• Double-category method.
Once you elect to use an average basis, you must continue to use it for all accounts in the same fund. (You must also continue to use the same method.) However, you may use the cost basis (or a different method of figuring the average basis) for shares in other funds, even those within the same family of funds.
The above is quoted from a website http://www.itrademax.com/ipress/trademax-glossary/average-basis.htm
You can click it to get more information..
