Best execution only share dealing service, no inactivity/quarterly fees? (iweb / XO?)

masonic

Onedrew wrote: »

The cost-per-share valuations are based only on purchase price and do not change if you sell some, whether you sell at £1 or £1,000 a share.

Nor should they. The average price paid for your current holding is just that, not a reflection of your profit/loss or what you have sold in the past. I'm not aware of any other platform that does this differently. The same comment goes for the other two duplicate posts you have made in other threads.

Onedrew

With Charles Stanley, for example, the valuation shows the amount I have paid overall for my shares and takes into account buys and sells. No need to do anything but take the total cost shown and divide by the number of shares held to get an accurate result. With iWeb the cost is based only on purchases and does not take into account any sales, so dividing the book cost by the number of shares held gives an innacurate figure once you have sold any of your holding.
This also renders the profit/loss figure shown in the iWeb valuation as inaccurate once I have sold some of the shares. The valuation includes a profit/loss column which shows my cash gain/loss and percentage gain or loss, neither of which are correct once some shares have been sold. How can it be OK for the profit/loss column not be a reflection of actual profit/loss?

grey_gym_sock

well, if i originally bought 1000 shares for a total cost of £1000, i.e. £1 per share, and i still have 500 of those shares, then IMHO the true cost of the remaining 500 shares is £500, i.e. still £1 per share. on the 500 shares i've already sold, i may have made a gain or a loss, depending on the sale price, but i don't expect to see that reflected in the cost of my current holding. after all, if i'd sold the entire holding, i wouldn't expect to see the overall gain or loss displayed: all broker accounts i've used only show me the cost of current holdings, not of holdings already disposed of.

suppose i sold the first 500 shares for £1500. are you implying that the cost of the remaining 500 shares should be displayed as MINUS £500?

the proportionate approach (i.e. i have 50% of the original shares left, so 50% of the original cost is used) is also the basic way that CGT works nowadays, i.e. it uses "pooling".

you can look at it differently for your own purposes, of course.

in any case, you shouldn't rely 100% on costs shown in any broker's statement. they don't always get more unusual things (e.g. returns of capital) correct. the best approach is to check that the broker's contract notes are 100% correct at the time, and then rely on them.

bowlhead99

To clarify, Onedrew:

Are you saying that if you buy 1000 shares for £100, 10p each, and then you sell 200 shares (whether you sell them for 20p or 5p or 1p or whatever) so that you have only 800 shares left, the book cost of those shares is never updated no matter how many disposals you have?? So that it's always still showing the full original £100 as the cost for those 800 shares instead of the correct figure of £80?

If it gives you a total cost shown of £100 for the 800 shares you have left, implying they cost 12.5p each instead of the 10p you actually paid for each of them, your implied profit from the valuation change to its current price is always going to be seriously understated and the information would be useless for CGT purposes. That sounds like a fundamental error and I'm surprised X-O (who are a budget brand but operated by a reputable and regulated group) would not listen to your complaint.

Edit- grey gym sock's explanation sounds like what I would expect to see.

Onedrew

Hi bowlhead99 and grey gym sock
Thanks for taking an interest and I hope I can clarify. On the iWeb valuations page, which shows all my holdings, there is a column headed 'Average cost per share', and it sits next to the column headed 'Quantity' to reflect the number of shares held.
If I buy one share in XYZ for £15 the columns show quantity 1, average £15
If I then buy another share in XYZ for £10 the columns show quantity 2, average £12.50
If I sell one share in XYZ for £20 the columns show quantity 1, average price £12.50 (£7.50 by my reckoning)
If I buy another share in XYZ for £5 the columns show quantity 2, average price £8.75 (£6.25 bmr)
The book price and profit and loss columns are calculated using these averages and not a simple division of the total spent divided by the number of shares held.
I know of no other arena where an average varies only with additions and not with subtractions and, having taken the table at face value, I made mistakes. Sometimes this worked to my benefit, and sometimes to my cost.
I think iWeb is great and recommend people to use it, but to be aware that the profit and loss figures are not based on a true average cost per share once you sell part of your holding in a particular share. As long as you keep your own records to work out your true position there is no chance you may accidentally sell at a true loss. I wish had been aware of this and I feel it's worth letting people know.
With the Charles Stanley site one is given the true tax cost and a simple end of year CGT statement.

TCA

The peculiarity I have noticed with iWeb is that on a straightforward purchase the valuation shows the actual purchase price of the share, and to get to the book cost you multiply this share price by the number of shares held, then add stamp duty and dealing charges. So far so good IMO.

Then if you buy more shares (in my case via dividend reinvestment), then the average share price then reflects the book cost (including stamp duty and dealing charges), divided by the number of shares held.

I haven't explained that too well, but basically on a first-time purchase of a share, iWeb show the actual share price paid, excluding stamp duty and dealing charges). But when additional shares are purchased, they work backwards to an average share price which includes stamp duty and dealing charges.

Is this what you mean?

Onedrew

I hadn't noticed any issue with the very first purchase price. I have not bought any first-time shares for quite a while. The site states that the average price does include dealing costs. My gripe is that when shares are sold the average price shown does not change. It is true that if one makes a killing the average price would show as a negative figure. Can't wait!

Thrugelmir

Onedrew wrote: »

If I sell one share in XYZ for £20 the columns show quantity 1, average price £12.50 (£7.50 by my reckoning)

£15 + £10 = £25

Divided by 2 = £12.50 average purchase price.

Sell one share. Average price paid still equals £12.50.

Please explain £7.50p calculation in detail.

Onedrew

Cost of 1 share 15+12.50-20=7.50

bowlhead99

Onedrew wrote: »

Hi bowlhead99 and grey gym sock
Thanks for taking an interest and I hope I can clarify. On the iWeb valuations page, which shows all my holdings, there is a column headed 'Average cost per share', and it sits next to the column headed 'Quantity' to reflect the number of shares held.
If I buy one share in XYZ for £15 the columns show quantity 1, average £15

OK, with you so far.

If I then buy another share in XYZ for £10 the columns show quantity 2, average £12.50

OK, still with you so far.

You've got a big pool of shares which are all fungible and homogenous (i.e., they are all identical and have the same rights and obligations. Imagine a big box of paperclips sitting in a drawer; from time to time you might use some of them, but you don't care which particular ones you use. From time to time you might add another bag of fresh ones to keep your levels up, but you aren't so crazy as to worry about the individual prices you paid for each individual clip.

If you have a thousand which cost £15 and then another thousand which cost £10, you end up with a big pile of 2000 which cost £25. Average price £12.50 per thousand paperclips. Or in your case average price of your two indistinguishable shares is £12.50 per share.

We are all on the same page of Business 101 here.

If I sell one share in XYZ for £20 the columns show quantity 1, average price £12.50 (£7.50 by my reckoning)

OK, this is where you have gone wrong, in the opinion of hmrc or anyone who has ever done any accounting or tried to work out how profitable their business is.

We were just in agreement that you had a pile of shares that cost 12.50 each. Or in my case paperclips costing 1.25p each. Ten seconds ago you were ok with the fact that each share had a cost of 12.50. Now you have sold one. You haven't sold the other ones. The ones you haven't sold, still cost you 12.50 each. But what you have done, is sold ONE of the shares that cost £12.50, for £20. Success! Profit! Acquiring a share for less than £20 and selling it for £20, is a Win.

Unless the shares are in an ISA or pension, where HMRC don't care about your activities, then you need to keep records that say that you had a share which you bought for £12.50 and sold for £20, making a £7.50 capital gain. You also need to know that you had another share, indistinguishable from that first one, which you also acquired for £12.50 and might in the future sell for another gain, or perhaps a loss, depending on how the markets move before your next sale.

Your "by my reckoning" is just trying to pretend that any proceeds from selling shares at a profit for way more than you paid for them, is not making any money at all and you will just knock the money off the cost of your remaining shares until you are eventually sitting on a pile of remaining shares which cost you nothing. At that point (which might take a long time) you would presumably say to HMRC, hey I've been in business for twenty years and trading all these shares but I've never ever made any money out of it, honest guv... I mean, sure I'm sitting on a pile of shares which are pretty valuable and somehow didn't cost me a penny, but I've never made any profit from this activity so I don't owe you any taxes yet!

Could you imagine the outrage if directors of a company told their investors and the taxman that they had never made any profits for years (causing everyone to think it was a terribly unsuccessful company, so all the investors threw their share certificates away or gave them to charity) and then all of a sudden it emerged that actually the company was sitting on many billions of pounds of inventory which it had accumulated over the years, but it had chosen to simply pretend that every time it did a successful sales transaction it would just reduce the "cost" of the goods it hadn't sold yet, instead of admitting it was making profits on its trades... Their hilariously over-prudent accounting policy would be accounting scandal of the century.

If I buy another share in XYZ for £5 the columns show quantity 2, average price £8.75 (£6.25 bmr)

The stockbrokers system knows that you have 1 share (or 1000 paperclips) which had an average cost 12.50, both before AND after you sold the other share (or pile of paperclips), as above. And it can see you are now doubling the quantity you hold, to two, by going out and spending another £5 on purchase costs. The cost of the contents of the bucket has gone up from £12.50 when you buy more things and throw them in the bucket.

So the cost of what you now have in your bucket has increased to 17.50. If there are two items or two thousand items or two million items in the bullet and the total contents of the bucket is 17.50, the average price is now only £8.75 per. If you ever do any sales in the future you would compare the proceeds of those sales with the carrying cost of £8.75 to see if you're making money.

The book price and profit and loss columns are calculated using these averages and not a simple division of the total spent divided by the number of shares held.

The book cost of what is in the bucket has to be divided by the number of things in the bucket to get the cost per thing in the bucket. Where you are going wrong is bringing income from things that aren't even in the bucket any more, into the cost calculation of what's in the bucket.

The things that are not in the bucket any more because they were given away or sold, are not relevant and whether you sell them for a fortune or you give them away for a smile, those "proceeds" don't come in to the calculation of what is still in the bucket and hadn't been sold for a fortune or a smile.

So, the cost per item of the items in the bucket *is* a simple division of the total spent on buying the items, which is what you want, if you're trying to get a reminder of what something actually cost. But what you've tried to mix together is the total spent on buying the items in the bucket... with some money you got from selling a bunch of stuff that isn't in the bucket.

I know of no other arena where an average varies only with additions and not with subtractions

The average cost per item of what you paid for the contents of your bucket can only vary when you add something to the bucket.

If you go to a car boot sale and buy 100 old pieces of Lego in a box for a tenner, you can say each piece cost 10p and it might be an ok price compared to buying it new. So 10p per piece is your cost.

If you then take one piece out and give it to my nephew, who pays you with a smile, you will only have 99 pieces left. We all know tthat those 99 pieces of Lego cost you 10p each, so the cost of the pieces of Lego that are left in your box cost you £9.90. The cost of the Lego you gave to my nephew cost you 10p which satisfactorily explains where your £10 total has been spent. It's been spent on a box of 99 Lego bits, and a small gift.

But using *your* maths, you would subtract the (zero) proceeds from my nephew from the £10 cost of your Lego and be left with 99 pieces of Lego for £10. You would do that because you "know of no other arena where the average varies only with additions and not with subtractions". The result of your funny maths is that you are very happy to give Lego to my nephew because it seemingly doesn't cost anything (the "loss" just gets rolled into what you see as the "cost" of what's left)... But over time you become reluctant to keep buying Lego because it keeps costing you £10 for 99 units and you think 10.1p a unit is quite expensive when you heard that it can be bought from typical car boot sales for only 10p a piece.