General Stock Investment Strategies/Separate Stock Purchases

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Question
Hello:

If an investor makes two separate purchases in a stock, does he determine the break even amount on both separate purchases or does he combine the two total shares and determine the break even price?

Example:  50 shares purchased at $55.00 two weeks ago and 50 shares purchased today at $65.00 with a commission of $10.00 to buy and to sell.

I thank you for your reply.

Answer
Kenneth, not sure the context you mean...for tax purposes, those would be two different share lots, each with its own cost basis and break-even price. Imagine the stock was currently at $60 - you could either sell the $55 batch at a gain, or the $65 one at a loss; if held in a taxable account, these have different tax results.

If you're just thinking of when an overall position will break even, you can just combine the costs of the two batches.

Regardless of the context, you should always factor in commissions as part of this. They increase the cost of a purchase, and reduce the amount realized when you sell - which raises your break-even price.

-Tad

General Stock Investment Strategies

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Tad Borek

Expertise

I am a San Francisco-based investment adviser and attorney.

Experience

I opened my investment advisory practice, Borek Financial Management, in 1999, and have been a licensed attorney since 1993.

I received my B.S from Cornell University, and a J.D. from George Washington University Law School.

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