How to Figure a Realized Percentage Holding-Period Return

An investment’s realized holding-period return, or realized return, is the total profit or loss you earn during the investment’s holding period. The holding period is the time between when you buy an investment and when you sell or are considering selling the investment. “Realized” means that the holding period for which you calculate the return has already passed, and the profit or loss has already been earned, or realized. You express a realized holding-period return as a percentage. A higher percentage represents a higher profit.

Instructions

1. Determine the price you paid for an investment and the price for which you sold it. Determine the total income you received from the investment while you owned it. For example, assume you bought a bond for $950, sold it for $1,050 and received $100 in total interest payments.

2. Add the investment’s income and selling price. In this example, add $100 in total interest payments and a $1,050 selling price to get $1,150.

3. Subtract the purchase price from your result. In this example, subtract $950 from $1,150 to get $200.

4. Divide your result by the purchase price. In this example, divide $200 by $950 to get 0.21.

5. Multiply your result by 100 to calculate the realized holding period return as a percentage. A positive percentage means you profited from the investment, while a negative percentage means you lost money. Continuing with the example, multiply 0.21 by 100 to get a 21 percent realized holding-period return.

Tips & Warnings

• Calculate the realized holding-period return for your different investments to measure and rank their performance.

References

• Contemporary Financial Management, 11th Edition; R. Charles Moyer, et al.
• Equity Asset Valuation, Second Edition; Jerald E. Pinto, et al.