Hi Charley,
I don't have enough time at the moment to give a fuller reply, so I'll just respond to the question about the calculation of actual cost - whether it be LIFO, FIFO, or Average.
Assume this scenario:
a) buy 100 shares @ $10
b) buy 50 shares @ $8
c) buy 50 shares @ $6
d) sell 60 shares @ $8
e) sell 60 shares @ $9
There is no rhyme or reason for this sequence of buys and sells. It is for illustration purposes only.
True Cost after each transaction:
a) LIFO, FIFO, and Average are all at $10 per share.
b) LIFO, FIFO, and Average are all at $9.33 per share.
c) LIFO, FIFO, and Average are all at $8.50 per share.
This is simply a calculation of:
(sum of $ value of purchases) / (sum of shares purchased)
The difference comes in to play when there are sales.
True Cost after each transaction:
LIFO:
d) Take away 50 @ $6 + 10 @ $8 and there remains:
100 @ $10 + 40 @ $8 = $9.43 per share.
e) Take away 40 @ $8 + 20 @ $10 and there remains:
80 @ $10 = $10 per share.
FIFO:
d) Take away 60 @ $10 and there remains:
40 @ $10 + 50 @ $8 + 50 @ $6 = $7.86 per share.
e) Take away 40 @ $10 + 20 @ $8 and there remains:
30 @ $8 + 50 @ $6 = $6.75 per share.
AVERAGE (which works the same as for purchases):
d) $8.71 per share.
e) $8.50 per share.
These values could be converted into a "Portfolio Control-like" number:
LIFO, FIFO, and AVERAGE:
a) 1000
b) 1400
c) 1700
LIFO:
d) 1320
e) 800
FIFO:
d) 1100
e) 540
AVERAGE:
d) 1220
e) 680
I hope that's clear. And, for some reason, when running an AIM-like program using actual cost, only LIFO works.
I apologize if the numbers don't line up on screen.
Matt
AI
