FIFO (First In, First Out)
An accounting method where the oldest inventory or shares are sold first.
FIFO assumes the first items purchased are the first items sold. For stock investing, FIFO means your oldest shares are sold first when you sell a partial position. This matters for taxes: if your oldest shares have the largest gains, FIFO produces higher capital gains taxes. The alternative is specific identification, where you choose which shares to sell — often selecting the highest-cost shares to minimize taxes.
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