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We are updating our performance calculation methodology

On the 26th of November 2017 the nabtrade platform will be moving from a FIFO (First In, First Out) method to a Weighted Average Cost methodology.
From this date, changes to the cost base will be reflected in nabtrade Desktop and m.nabtrade; as well as IRESS Viewpoint, IRESS Trader and IRESS mobile application.
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Transactions prior to October 2012 will no longer appear in your holdings history, however the quantity of your holdings will be unaffected. Please call us on 13 13 80 if you would like a copy of these transactions.

What is the difference between FIFO and Weighted Average Cost?

In the FIFO methodology, price assigned to shares is the price at which the shares are bought. This is assuming that the first shares to be sold will be the first ones that had been bought. 

In weighted average cost methodology, the average cost is calculated as the total purchase value of a holding, divided by the number of units purchased.

Both methodologies use the same portfolio holdings, but the unrealised profit is different. You may see such changes within your own portfolio due to this change. 

Example

 
Units
Unit Price
Total Consideration

Purchase NAB Shares on 1 May

200

$31

$6,200

Purchase NAB Shares on 5 May

300

$32

$9,600

Total NAB Shares Held

500

   
FIFO calculations:

Average price: (200 units x $31) + (300 units X $32)/500 = $31.60

Weighted Average Cost calculations: 

Average: (200 units x $31) + (300 units x $32) / 500 = $31.60

Sold NAB Shares on May 11th

100

Remaining

400

FIFO calculations:

Average price: (200 units x $31) + (300 units X $32) - (100 Units x $31) /400 = $31.75

NAB market price = $33

Unrealised gain = ($33.00 x 400) - ($31.75 x 400) = $500

Weighted Average Cost calculations:

Average price: Average price unchanged by share sale = $31.60

NAB market share price = $33

Unrealised gain = ($33.00 x 400) - ($31.60 x 400) = $560

Because FIFO methodology maintains a historical price for each parcel of units, a share sale causes the average price to be recalculated according to which specific parcel/s of shares are left. 

Weighted Average Price changes when shares are acquired; it does not change when shares are sold. As such, the sale of shares in the example above does not cause a recalculation of average price.

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If you have any questions about this change, please call us on 13 13 80 Monday to Friday, 8am - 7pm (AEDT); or email enquiries@nabtrade.com.au