FIFO & Realized P&L — Simple Guide for Investors
FIFO (First-In, First-Out) and Realized P&L are how many brokers and spreadsheets decide which shares you sold and how much profit/loss you actually locked in.
What these terms mean
- FIFO: When you sell, the system assumes you sell your oldest shares first.
- Realized P&L: Profit/Loss from trades you have closed (you sold). Gains/losses on unsold positions are unrealized.
Quick formula
For each matched lot under FIFO:
Realized P&L = (Sell Price − Cost per Share) × Quantity Sold
Worked example (FIFO matching)
| Date | Action | Qty | Price | Value |
|---|---|---|---|---|
| Jan 10 | Buy | 100 | $10.00 | $1,000 |
| Feb 01 | Buy | 50 | $12.00 | $600 |
| Mar 05 | Sell | 120 | $15.00 | $1,800 |
Under FIFO, the 120 sold shares come from the oldest lots first:
| Lot used (FIFO) | Qty matched | Cost/share | Sell price | P&L/share | Realized P&L |
|---|---|---|---|---|---|
| Buy @ $10.00 (Jan 10) | 100 | $10.00 | $15.00 | $5.00 | $500.00 |
| Buy @ $12.00 (Feb 01) | 20 | $12.00 | $15.00 | $3.00 | $60.00 |
| Total realized P&L | $560.00 | ||||
Sale summary
- Sold: 120 shares @ $15.00
- Realized P&L: $560.00
- Realized P&L/share (avg): $560 ÷ 120 = $4.67
What remains (after sale)
- Leftover from $12.00 lot: 30 shares
- Unrealized P&L depends on current market price
Why it matters
- Taxes: FIFO determines the cost basis used to report gains/losses.
- Clarity: Separates what you’ve actually earned (realized) from paper gains (unrealized).
- Consistency: Using one method across all trades keeps records clean.
Other cost-basis methods (very short)
LIFO sells your newest shares first; Average Cost uses a blended cost per share. Your broker or local rules may restrict which methods you can use. Always check your local tax guidance.
How to track this in a spreadsheet
- Keep a “Transactions” sheet with columns like: Date, Ticker, Action (Buy/Sell), Qty, Price, Fees, Lot ID (auto for buys).
- FIFO queue logic: When you sell, allocate the sold quantity to the oldest open buy lots:
- Reduce each lot’s remaining quantity until the sale is fully matched.
- For each matched portion, compute
(Sell Price − Lot Cost) × Matched Qty.
- Roll-up Realized P&L by sale (sum of its matched portions) and by ticker (sum of all sales).
- Holdings view: Sum remaining quantities per open lot (that weren’t fully sold) to show your current inventory and unrealized P&L.
Tip
If you already use a “Transactions → Holdings” workflow, you can add a Lot Allocation helper table to record how each sell maps to one or more earlier buy lots. This keeps FIFO auditable and clean.
Disclaimer: This is general information for record-keeping. Tax rules vary by country; consult local regulations or a professional.
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