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. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ...
  2. Is there a difference between financial spread betting and arbitrage?

    Find out more about financial spread betting, arbitrage and the differences between financial spread betting and the arbitrage ...
  3. What does a high turnover ratio signify for an investment fund?

    Find out more about the turnover ratio, what the turnover ratio measures and what a high turnover ratio indicates about an ...
  4. How does a forward contract differ from a call option?

    Find out more about forward contracts, call options, the mechanics of these financial instruments and the difference between ...
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. Blue Chip Indicator

    A formal gauge or measure of the performance of a selected group ...
  5. Financial Exposure

    The amount that one stands to lose in an investment. For example, ...
  6. Most Active List

    A listing of stocks with the highest trading volumes on a specific ...

You May Also Like

Related Articles
  1. Active Trading Fundamentals

    Is there a difference between financial ...

  2. Fundamental Analysis

    What does a high turnover ratio signify ...

  3. Options & Futures

    How does a forward contract differ from ...

  4. Investing Basics

    What is the difference between passive ...

  5. Stock Analysis

    IBM Vs. The Dow Jones Industrial Average

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!