Which mutual fund shares do I use for average cost of sale of some shares?

[me2here]

In 2019 I sold some of the shares in a mutual fund. Since some shares were purchased long ago, the sale was "non-covered", i.e., I have to determine the basis myself. Which means I need to calculate the average share cost, then multiply by the number of shares sold, of course.

But...when calculating the average cost, which do I do:

1. total the cost of the shares sold, divide by the number of the shares sold; or instead
2. total the cost of all the shares I own right now, divide by the number of all shares I own?

[DavidD66 · Accepted solution]

You use the cost of ALL shares owned, before you sold, divided by the total number of all shares, before you sold. 

[me2here]

Just to be sure...you're saying I use option #1 of the two I list, right?

[DavidD66]

No,that's not what I'm saying.  It's option #2 except you use the number of shares you owned BEFORE you sold any and the cost of all the shares you owned Before you sold any.

[me2here]

OK, I think I got it right -- please verify:

• total the cost of all shares owned before the sale, divide by the number of all shares owned beforethe sale

(which I think is what you originally said!)

[DavidD66]

Correct.  You got it this time!