AIM RE-bal

[2mc]

Let me try to be a little clearer. I'm going to use the beginning part of your illustration to help make the point clearer - at least, I will attempt to make it clearer.

Your scenario:

Price...SharesBot....Cost
25......4............100
10......10...........100
4.......20...........100

A total of 34 shares were purchased for a total cost of $300. This means the true average cost is, as you said, $8.82 per share.

Now, forget for a moment how one determines the number of shares to sell, let's just say we want to sell 25 shares for whatever reason.

Starting from the last, we have 20 of the 25 shares available for sale, so we sell them. Then, we have 10 shares available for sale, of which we only need 5, so we sell 5 of those. This is how the table would look after this sale:

Price...SharesBot....Cost
25......4............100
10......5............50
4.......0............0

We now have 9 shares left at a cost of $150. Our true average cost *LIFO* is now $16.67 per share. So, after the sale the true average cost went up. I hope that is clearer.

Regarding whether or not Synchrovest uses average buying price or average true cost, I see your point. However, since Synchrovest sells 100% when there is a sale, the average buying price and the average true cost are the same. I guess I was referring to what one would do, if one were trying to operate an AIM program like Synchrovest, where there would be partial sales. Thanks for pointing out that I wasn't spot on accurate in that description.

Matt