I am confused with this selling of stocks?(read below)?

Question

If I buy a stock for 1 dollar and invest 500 dollars. The stock goes to 2 dollars. I should have 1000 dollars worth of stock. But let’s say I sell some of the position. I sell the  stock at 2 dollars, worth 800 dollars of stock. I should have 200 dollars worth of stocks left. So does that mean it’s 200 dollars worth of stock bought at the 1 dollar level. You see what I mean. Am confused????

StephenWeinstein · Answer

When invest $500 at $1/share, you get 500 shares.
When it goes up to $2/share, you still have 500 shares, which are, yes, worth $1000.
You sell $800 of stock, at $2/share, that's 400 shares.  So know you have 100 shares left, worth $200.
You also have $800, but you have to pay tax.  You sold 400 shares and you made a profit of $1 on each of those shares, so your profit was $400 (you spent $100 buying shares you still own, and $400 buying shares you sold for $800, so the profit on the shares you sold was $400).  So now you pay capital gains tax on the $800.  That leaves you with 400 shares and some money, but less than $800.

Anonymous · Answer

You are confused over nothing.

A Hunch · Answer

You buy 500 shares of stock at $1 a piece.  Your cost basis is $1.
You sell 400 shares of stock at $2 a piece = $800.  $400 is your original cost and $400 is profit.

You aren't in the negative, because you still own 100 shares of stock that are now worth $200 but you bought at $100.

For you to be in the negative, the shares have to go much lower than $1 because you have already gotten $1 profit from your dollar cost averaging.

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I am confused with this selling of stocks?(read below)?

3 Answers