Quote:
if I buy a 1 oz bar at $20 and sell at $30, that means I raked in 50% in profit. But if I then buy again at a later date for $40, even when I can sell for higher than $40, before I sell again my books will say I've only broke even with that first $30 sale.
Don't understand your example. You made a 50% ($10) profit. Your book is now clear, and $40 is a new starting point. This is how brokers figure their biz. It doesn't matter that they are now paying more than they sold for as long as they make money on the new one. The $10 profit is on the books, and stays there regardless of what they have/get for the new one.
Four systems, pick one and be consistent:
LIFO: Last in first out. Popularized by Scrooge McDuck. fill your money bin, add and subtract from the top. Reflects cost best in a rising market, likewise tends to show lower profits.
FIFO: First in, first out. Like a vending machine, you add at the top, sell the older stuff on the bottom. Shows higher profits in a rising market.
Cost: Often used by dealers, those funny letters on their holders. MDIV means they paid $2375 or whatever.
Average: You need to know your cost per and quantity. When you add more, you add the new cost to the old total cost, and divide it by the new total quantity.
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Posted 09/15/2011 08:46 am
