How are purchase costs affected by my trading frequency?
When looking at a purchase cost for a holding on the portfolio it must be remembered that the valuation is based on an average value per share. If the stock has been dealt frequently, then the portfolio screen will not show a breakdown of the purchase cost per deal, but a combined total for the entire holding.
If 100 shares in BNM are purchased at £100 including commission and stamp duty then the purchase cost for the holding will be £100.
If another 100 shares in BNM are purchased the purchase cost for the holding will increase by the additional purchase value. If the additional 100 shares cost £200 including commission and stamp duty the new purchase cost will be £300 for the holding of 200 BNM shares.
If a sale is completed to sell 50 of the 200 BNM shares (25% of the holding) then the purchase cost will be reduced by a proportionate amount (25%). 200 BNM shares is held with a purchase cost of £300, so selling 50 shares will reduce the purchase cost by £75* irrelevant of the sale proceeds. The new holding of 150 shares will now have a purchase cost of £225**.
*£300 x 25%= £75
**£300 - £75= £225