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Cost basis methods available at Vanguard

Weigh the pros and cons of each calculation method to pick one that best fits your investing style and tax situation.

When we calculate cost basis for your Vanguard investments, we'll automatically use "average cost" for mutual funds and "first in, first out" for individual stocks. But you can change those settings—or use "specific identification" if you're more of a hands-on investor.

Here are some details to help you understand the pros and cons of each method.

Cost basis methods


PROS

Simple to use.

Less detailed recordkeeping.

CONS

Less control.

May be less tax-efficient than other methods.


PROS

Simple to use.

Hands-off management.

CONS

May be less tax-efficient than other methods.

Gains and losses are market-dependent.

May require more detailed recordkeeping.


PROS

More control.

Potential for greater tax efficiency.

CONS

Hands-on management.

May require more detailed recordkeeping.

Set your preferred cost basis method

It's best to set your cost basis method when you're buying new shares of an investment, especially in a taxable (nonretirement) account. If you don't, when you sell shares of that investment, you'll have to pick a method before you can complete the transaction.

Even if you've already selected—and even used—one of these cost basis calculation methods, you can change it for future sales whenever you want. And you can apply those changes to just one fund or to all the funds within an account.

Changes to or from the average cost method can't be accepted by phone.