Performance & Return
Cost Basis
Definition
The original purchase price of a holding used to calculate the gain or loss when the position is sold.
Why it matters
It determines the taxable gain when a position is sold. An incorrect cost basis creates tax surprises.
What most investors miss
The gap between what the term means and how it is usually applied.
They lose track of cost basis when positions are transferred between brokers or when dividends are reinvested automatically.
How to read it
Keep a record of cost basis at the transaction level not just the current value. Each lot can have a different basis.
Multi-account lens
How this term reads differently across brokers and accounts.
When holdings are transferred between brokers the receiving broker often resets or loses the original cost basis. This is one of the most common data quality problems in multi-broker portfolios.
Related terms
Terms that connect to cost basis.
Realized Gain
The profit from a position that has been sold and converted to cash.
Capital Gains Tax
Tax applied to the profit from selling an asset at a higher price than its purchase cost.
Transaction History
A complete record of every buy sell dividend reinvestment and cash movement in the portfolio over time.
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