WHAT IS FIFO (FIRST IN FIRST OUT)? (EASIEST EXPLANATION) Straight to the Point #STTP #362
In around two minutes you will know what is FIFO. You will get both professional definition and easy explanation. No intro, no outro, straight to the point. ► Get FREE stocks up to $4500 with Wealthsimple: https://bit.ly/3kzztaD ► My 226 Companies Watchlist: https://bit.ly/3cbWL3f ► The Best Books about Investing: https://www.amazon.ca/shop/artemdikarev ► Get $25 from Newton (Canada): https://web.newton.co/r/BP8LC6 ► Get $10 in Bitcoin from BlockFi: https://blockfi.com/?ref=ebccda0d ► Get $10 from Coinbase: https://www.coinbase.com/join/dikare_1 ► Download my FREE eBook about Investments: https://bit.ly/2FL2UHI ► Follow Me On Instagram: / artemdkrv FIFO, or First in First out, is the asset management and valuation technique in which assets acquired, produced, or purchased first are used, disposed of, or sold first as well. FIFO is one of the methods of calculating the cost basis of investments. With another one being LIFO, or Last in First out. And if you are not sure what cost basis or LIFO means, feel free to watch my other videos. FIFO method can be used for asset management, inventory valuation, investments cost basis calculation or for any similar goals. But the idea remains the same. Which is when assets or investments are sold, the assets or investments that were acquired the earliest are disposed of. Let’s say, you bought 20 shares of Company A in January for the price of $100 per share, and then 30 more shares in May for the price of $120 per share. Then in July, when the price has reached $125, you decided to sell 40 shares. So, your total profit is $5000. In order to calculate your cost basis for tax purposes, you can use FIFO method. Which means that you take your first 20 shares that you bought back in January and multiply it by January price of $100, giving you $2000. And then you take the rest 20 shares from the second batch of shares you purchased in May for $120, giving you $2400. So, your total cost basis for 40 shares using FIFO method would be $2000 plus $2400 which equals $4400. And since your total profit was $5000, your taxable gain is simply the difference between the sell price and the cost basis, which is $5000 minus $4400 and it equals $600. Using different methods for calculating your cost basis, such as for example FIFO, LIFO, or average cost basis, might give you different results. Which might increase or decrease your taxes. Please compare it with LIFO method that I used in my next video and you will see how your taxable gain becomes different. If you find my content interesting, please consider subscribing to my channel. It helps a lot as a beginner creator. And let me know if there is anything you would like to know about personal finances and investing. *None of this is meant to be construed as investment advice, it's for entertainment purposes only. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.
