How do you pick the best cost basis method?

[montrose]

I received a letter from my mutual fund company saying that I need to make a cost basis election. The default is average cost. Other options include First in First Out; Last in First Out; High Cost First Out; Low Cost First Out; Loss/Gain Utillization; and Specific Lot Identification (must provide secondary method selection).

I thought of using High Cost First Out as a method of maximizing tax losses. But I think that puts more of a burden on me to keep track of the transactions.

On the other hand, although these funds are in a taxable account, they are part of my retirement savings. I haven't had to sell any shares as so far I've been able to rebalance with new money.

[montrose]

Thanks for the replies. I picked the specific lot/FIFO that Disinfranchised Investor uses although I have neither a large portfolio nor multiple little purchases. I purchase once a year when I rebalance. The good news is that I can change my mind later.

After making a cost basis method election, can I change my mind and choose another method?
You may always change a cost basis election prospectively for covered shares acquired from that date and going forward. If you elect or are defaulted to Average Cost, and there have not been any redemptions or transfers of covered shares from your account, you may ‘revoke’ your prior election and retroactively elect a different cost basis method for your covered shares. However, once you sell covered shares using the Average Cost basis method, you may not change your cost basis method on existing covered shares in your account. For all other cost basis methods, you may change your cost basis method on existing covered shares at any time.