How it works
The total cost of all the covered shares you bought is divided by the total number of covered shares you own, so all of your covered shares in a fund will have the same basis. Unless you select another method, in writing, this will be the method we use when you sell mutual fund shares. It will appear on your statement as AvgCost.
Vanguard also uses average cost to track the basis for noncovered shares. However, the basis of the shares is tracked separately from the basis of the covered shares. The noncovered shares will also generally be sold before the covered shares. Vanguard won't report the basis of noncovered shares to the IRS.
Get details on covered & noncovered shares
You can only use the average cost method for mutual funds and most ETFs (exchange-traded funds), and for stocks acquired as part of a dividend reinvestment plan on or after January 1, 2011.
Are you investing in something other than mutual funds?