How to Calculate Stock Price Return
The rule of the stock market has always been "buy low, sell high." If you can do that, you will make a profit. This article can't tell you how to time the market to accomplish that. That's up to your own market research. This article can show you how to measure how successful you've been at buying low and selling high by showing you how to calculate your return.
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Instructions
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The Basics
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1
Subtract the price you paid for your stocks from the price you sold them for. This is your gross profit (hopefully, it's in the positive numbers, otherwise, you're looking at a gross loss.) Make sure you add any commissions you paid for the stock to the price you paid for them and subtract paid commissions from the total you sold the stocks for. For example, if you bought stocks for $5,000 and sold them for $7,000 and your commission was $35, then your gross profit would be ($7,000 minus $35) minus ($5,000 plus $35) or $1,930.
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2
Add any dividends you were paid on the stock to the gross profit. For example, if your stocks paid $210 in dividends, your gross profit would then be $1,930 plus $210 or $2,140.
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3
Divide your total return (total cost of stocks plus gross profit) by the total price you paid (cost of stocks plus commission) on the stocks. From that answer, subtract 1. This provides your total percentage return. For example, the above stock total return would be ($5,035 plus $2,140) divided by ($5,000 plus $35) minus 1 or 43 percent.
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4
To find how much this equates to on an annual basis, which is how most stocks report their numbers, you need to divide your total percentage return (including the 1 you subtracted in step 3) to an exponent that is (1 divided by the number of years you held the stocks). Don't fret about the math. Here's an online calculator for it: freeonlinecalculator.net/calculators/algebra/exponent-fractions.php. For example, if the above stocks were held for five years, your formula would be 1.43 (1 divided by 5) or 1.074.
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5
Subtract 1 from this answer for the annualized return. For example: With the above numbers, 1.074 minus 1 equals 0.074 or 7.4 percent. The stocks had a return of 7.4 percent a year for five years.
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Tips & Warnings
If your broker already includes any fees and commissions in your portfolio statements, you don't have to worry about including them in this formula.
These formulas don't include any effect of taxes on your returns.
References
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