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Learning, Sharing, and Teaching => Investor Alley => Topic started by: stlbrah on November 03, 2016, 01:11:45 PM

Title: Question about Dollar Cost Averaging and Capital Gains
Post by: stlbrah on November 03, 2016, 01:11:45 PM
I am wondering what would happen in this scenario:

What if someone invested 30k over a year ago into a target date fund, and then began investing 500/month dollar cost averaging at the same time. If you sold 20k after a year, would vanguard/fido/etc automatically factor it as long-term capital gains, or would it go by the last purchase of the dollar cost averaging?

Thanks
Title: Re: Question about Dollar Cost Averaging and Capital Gains
Post by: NoStacheOhio on November 03, 2016, 01:29:58 PM
It depends on how your broker sells your shares, but I know Fidelity also lets you specify which shares to sell. IIRC, the default is oldest to newest.
Title: Re: Question about Dollar Cost Averaging and Capital Gains
Post by: Kakashi on November 03, 2016, 02:09:55 PM
You need to specify to the brokerage company how you want your cost basis calculated.  For instance FIFO (first in first out), it well sell the earlier shares first.  Most brokerage companies default to "average cost basis", which means it takes a weighted average.  That means some will be long term and some will be short term.
Title: Re: Question about Dollar Cost Averaging and Capital Gains
Post by: stlbrah on November 03, 2016, 02:29:41 PM
It depends on how your broker sells your shares, but I know Fidelity also lets you specify which shares to sell. IIRC, the default is oldest to newest.

You need to specify to the brokerage company how you want your cost basis calculated.  For instance FIFO (first in first out), it well sell the earlier shares first.  Most brokerage companies default to "average cost basis", which means it takes a weighted average.  That means some will be long term and some will be short term.


Interesting... Thanks, that is exactly what I was looking for.