What is Cost Basis?
The original amount you paid for an investment, used to calculate gains, losses, and taxes.
Educational — not investment advice
Cost basis is what you actually paid for a holding, including commissions. When you sell, your gain or loss is the sale price minus the cost basis — and that is what tax is calculated on.
When you buy the same security at different prices over time, the basis has to be tracked per lot. Methods like FIFO (first-in, first-out), LIFO, and average cost determine which shares are considered sold, which changes the reported gain.
The trap most people miss
Getting cost basis wrong — after splits, dividend reinvestment, or partial sales — is one of the most common ways investors misjudge both their real return and their tax bill. Accurate per-lot tracking matters.
Frequently asked about Cost Basis
What is FIFO vs average cost?
FIFO sells your oldest shares first; average cost uses the blended average price of all your shares. They can produce different taxable gains.
Does dividend reinvestment change my cost basis?
Yes — each reinvested dividend buys new shares at their own price, adding lots and raising your total basis.
Related terms
Guides that use Cost Basis
Track what you actually own
Tradune puts every holding in one place — no brokerage login — and measures your return against a buy-and-hold SPY twin funded on your own dates.
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This definition is for educational purposes only and is not investment, tax, or financial advice. Concepts are explained in general terms; how they apply to your situation can differ. Always do your own research.