DCA on stock/ETF/UT with FIFO system

In the US, they always talk about FIFO and managing tax lots because they have capital gains tax. As such, it actually matters when they bought the shares and the P/L of each batch as it determines whether they can harvest a tax loss and whether they get charged with the much higher short term capital gains tax.

This also means that honestly, all your shares are fungible, meaning that your whether your broker sells your 'first 10 shares' or 'last 10 shares', it doesn't really matter because all shares are equal to each other. No matter how you look at it, you'll receive $14 less comms for your 10 shares.

So for that stock in particular, your entire position has a net P/L of $0 (not including comms impact). But yes, you could say that the position has an unrealised P/L of -$1 and the second batch has an unrealised P/L of $1. But its much easier to just look at it as a net P/L for the entire position.

So the the point of DCA is more to ride out the volatility in the market. Taking an extreme example, if a person DCAs every month into an ETF where the market crashed in March and the price of the ETF is as follows:

Feb: $330

March: 200

April: $280

If the investor DCAed into 10 shares every month, their 'average cost' would be $270, vs if they had put it in a lump sum investment (in Feb) where their average cost would've been $330.

Hope this makes it clearer!​​​