First in, first out (FIFO)
The FIFO method is relatively hands-off—you don't have to manually select which shares to sell since we'll automatically sell the oldest ones first. However, it can be less tax-efficient since sales and transfers are based on acquisition date and don't consider potential gains or losses.
With this method, your shares are sold in the same order you bought them, so the oldest shares go first. This method can be helpful if you hold both long-term and short-term tax lots, since shares held for more than 1 year are taxed at a lower rate by the IRS. It's available for all types of investments, and it's the default method for all investments other than mutual funds.
If you choose this method, please note that for any noncovered mutual fund shares you own Vanguard only keeps the average cost basis, so we can't assist you in determining each share's individual basis. If you plan to use the FIFO method, you'll need to use your own records to report your oldest lots on your tax return.
For all other noncovered shares, we'll first sell the shares for which we don't have an acquisition date, followed by the shares with the earliest acquisition date. As with noncovered mutual fund shares, we'll report the basis of the noncovered shares to you (if we know it), but won't send it to the IRS.
