How to Calculate the Rate of Return on Stocks

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The rate of return on a stock can be found with a simple calculation.
The rate of return on a stock can be found with a simple calculation. (Image: graph image by Attila Toro from Fotolia.com)

Stocks represent shares of ownership in a company. People invest in the company by buying stocks and measure the rate of return by the percentage increase or decrease in the stock’s price. The return is measured using percentages because investors want to know how much they are getting based on the size of their investment. For example, a $5 loss on a $9 stock is more significant than a $5 loss on a $210 stock.

Consult your financial records to determine the price you paid for the stock and the sales price of the stock. For example, you may have bought a stock for $50 and sold it for $44.

Subtract the original price from the sales price to find the gain or loss. In this example, you would subtract $50 from $44 to get -$6.

Divide the gain or loss by the original price to find the rate of return expressed as a decimal. Continuing this example, you would divide $-6 by $50 to get -0.12.

Multiply the rate of return expressed as a decimal by 100 to convert it to a percentage. Finishing this example, you would multiply -0.12 by 100 to find you had a rate of return of -12 percent.

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