How do you calculate the percentage gain or loss on an investment?

By Investopedia Staff AAA
A:

Calculating the percentage change of your investment is quite easy. All it takes is a little bookkeeping and either a simple calculator or a pad of paper for doing the long division. Here is what you need to do:

Take amount that you have gained on the investment and divide it by the amount invested. To calculate the gain, take the price for which you sold the investment and subtract it from the price that you initially paid for it. Now that you have your gain, divide the gain by the original amount of the investment. Finally, multiply your answer by 100 to get the percentage change in your investment.

If the percentage is negative, resulting from the market value being lower than the book value, you have lost on your investment. If the percentage is positive, resulting from market value being greater than book value, you have gained on your investment.

Here is what the formula looks like:

(Price Sold - Purchase Price)/(Purchase Price)

If you haven't sold the investment, you can use the current market price in the place of the price sold.

This basic formula is used every day to find out exactly how many percentage points indexes, stocks, interest rates, and so on have changed over a given period of time. For example, if the Dow Jones Industrial Average opens at 9,000 and closes at 9,300 today, the formula would show that the percentage change over the day was 3.33% [(9,300 – 9,000) / (9,000)].

However, investing does not come without costs and this should be reflected in the calculation of your percent gain or loss. The above is an illustration of the calculation without costs, such as commissions and taxing. To incorporate costs, reduce the gain (market price - price purchased) by the costs of investing. By incorporating these costs you will get a more accurate representation of your gain or loss. Also, if your investment paid out any income, such as a dividend, you will need to add this amount to the gain amount.

Here is a more detailed way to calculate gain or loss:

[(Amount Sold - Amount Paid) + Income Gain - Costs]/Amount Paid

Learn how to figure out your cost basis on an investment by reading How do I figure out my cost basis on a stock investment?

RELATED FAQS

  1. What are the differences between a systematic investment plan (SIP) and a recurring ...

    Differentiate between a recurring deposit and a systematic investment plan, or SIP, within an investment account, and learn ...
  2. What are the benefits and costs (or risks) of a systematic investment plan (SIP)?

    Discover the advantages and disadvantages of using a systematic investment plan; you may lower your average cost, or you ...
  3. What are the main differences between a systematic investment plan (SIP) and mutual ...

    Reduce your average cost per share on mutual fund investments using the dollar-cost averaging strategy by way of a systematic ...
  4. How do I calculate earnings per share with simple capital and complex capital structure?

    Learn the difference between simple and complex capital structures and how the structure affects a company's calculations ...
RELATED TERMS
  1. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  2. Hindsight Bias

    A psychological phenomenon in which past events seem to be more ...
  3. Paper Trade

    Using simulated trading to practice buying and selling securities ...
  4. Financial Exposure

    The amount that one stands to lose in an investment. For example, ...
  5. Blue Chip Indicator

    A formal gauge or measure of the performance of a selected group ...
  6. Most Active List

    A listing of stocks with the highest trading volumes on a specific ...
Related Articles
  1. The Enduring Importance Of The DJIA
    Economics

    The Enduring Importance Of The DJIA

  2. What Does The Dow Jones Industrial Average ...
    Investing Basics

    What Does The Dow Jones Industrial Average ...

  3. Can Good News Be A Signal To Sell?
    Fundamental Analysis

    Can Good News Be A Signal To Sell?

  4. Are Equity-Indexed Annuities Right For ...
    Savings

    Are Equity-Indexed Annuities Right For ...

  5. 7 Steps To A Successful Investment Journey
    Entrepreneurship

    7 Steps To A Successful Investment Journey

Trading Center