GLOSSARY TERM
Cost Basis
Cost basis is the original value of an investment for tax and profit calculations. It usually means the price you paid, plus any related costs such as transaction fees.
What does this mean in practice?
Your cost basis is used to measure whether you made a gain or a loss when you sell an investment. If you sell for more than your cost basis, you have a profit. If you sell for less, you have a loss. Keeping track of cost basis is important because it affects how your returns are calculated and, in many countries, how taxes are determined.
Example
You buy an ETF for €1,000 and pay a €5 fee. Your cost basis is €1,005. If you later sell it for €1,200, your gain is based on the difference between €1,200 and €1,005.
Why it matters
Cost basis helps you understand your real return, not just the sale price. It also matters for taxes, which can affect how much of your gains you actually keep.
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