Retire early tip #4 continued - Getting clear on your costs

The question: What’s the difference in cost basis for these two transactions? - Buy 100 shares at $100 and then buy another 100 shares at $90 - Now, buy 200 shares at $100 and then 200 shares at $90 Scenario 1: - Buy 100 shares at $100: Total cost = 100 shares * $100 = $10,000 - Buy another 100 shares at $90: Total cost = 100 shares * $90 = $9,000 - Total cost for both transactions = $10,000 + $9,000 = $19,000 - Total number of shares = 100 + 100 = 200 Cost Basis = Total Cost / Total Number of Shares Cost Basis = $19,000 / 200 = $95 per share Scenario 2: - Buy 200 shares at $100: Total cost = 200 shares * $100 = $20,000 - Buy another 200 shares at $90: Total cost = 200 shares * $90 = $18,000 - Total cost for both transactions = $20,000 + $18,000 = $38,000 - Total number of shares = 200 + 200 = 400 Cost Basis = Total Cost / Total Number of Shares Cost Basis = $38,000 / 400 = $95 per share They are the same! Even though the quantity of stock increases, the cost basis stays the same. Understanding your cost basis is key to making informed investment decisions and accurately tracking your profits. It’s the foundation for calculating how much you’ve really gained or lost when you sell your shares. Without knowing your cost basis, you could misjudge your profits and even face unexpected tax implications. By keeping a close eye on your cost basis, you can make smarter decisions about when to buy, hold, or sell, ensuring that every move you make is based on solid numbers rather than guesswork. In addition to protecting your profits, knowing your cost basis helps you manage your portfolio more effectively. It allows you to evaluate the performance of your investments and avoid emotional decisions during market swings. Ultimately, understanding your cost basis empowers you to build a stronger, more resilient portfolio that’s aligned with your financial goals. We help students, people just like you, understand this in our courses and usually the first step is hopping on [an assessment call](. Do the math, track your expenses, make money :) Jerremy and team If you no longer wish to receive these emails you may [unsubscribe](