If you’re not aware of calculate stock return you can be sure that even the most reputable sites for stocks won’t give you an idea of how much your investment will be worth over a particular period of time. You can also learn about the factors that affect the return on stocks to help calculate the value of the stock for the future.

What is the stock rate of return?

According to IG International Limited the rate of return (ROR) refers to the earnings that investments like stock or real estate earns over a certain time. It’s typically only for a single year and is determined by dividing the initial investment.

It is usually expressed in percentages that can be either positive or negative. The total return over a specific holding period gives an accurate picture of the results of investments because they are different in value. While rate of return may be termed the return on investment (ROI) by some, they’re actually two distinct terms.

So the return on stocks is the amount of income that your investments earn annually, compared to the original investment you made when acquiring them in the stock market. The original price of the stock as well as its final value are important. The value of money over time however, isn’t considered.

The standard rate for return is:

ROR = (Final Investment Value-Original Value of Investment/Original Investment Value) X 100 percent

However, it is crucial to know the distinction between stocks and shares even if some people tend to make them synonymous when talking about investments in the stock market. It is important to know this in calculating the return you will earn on your investment.

Investor.gov defines a stock as a security that gives the owner a share in the firm in which it is held. Shares in contrast, are the smallest unit that you are able to own in an organization. So, your company stock comprises a specific amount of shares that you acquire over time. Remember that stocks are often described as publicly traded corporations and shares to ownership units.

If you say that you have 20 shares, someone would expect that you name the company where you hold shares. If you claim to have 20 shares,, you should mention which 20 companies you purchased shares from.

Factors that affect Stock ROR

The factors that impact the outcome you can expect after applying the stock rate of return formula are:

The total amount of dividends earned for the year, or the period specified.

the number of shares you own in a company stock

The value of shares that are currently traded is the current market value company shares

the purchase price or the initial price of shares that you have

Calculating the Rate of Return on Stock

This guideline will assist you calculator stock returns to create an excel sheet , or by hand if you do not have access to a rate of return calculator. Be aware that the figures are not accurate and might not reflect the average rates of return in reality.

Let’s suppose you want to calculate the return rate on stock ABC over the last five years. In that scenario you will need to determine the price at which you purchased the shares you bought throughout the years, and then add them up. It is possible to refer to the original receipt in the event that you own it. However the statement from your brokerage account is also a good source. Taxes for Expats also states that you can look up the details online based on the day you purchased the shares.

After you have determined the number of shares you purchased at a specific price and then you can determine the total. If you purchase 100 shares in the ABC company at $1.50 per share during an economic recession and then later purchase 500 shares at $2.50 soon after, your total investment value is (100×1.5) + (500×2.5), which equals $1,400.

To figure out the current worth of your investment discover the market value for every company ABC share (which could be the value at which you recently sold the shares) and then multiply that by the total number of shares. If your company’s stock is currently valued at $11 per share after five years. If that is the case, that will be 600 shares multiplied by $11 for a final investment value of $6,600.

It is possible to calculate the ROR when you have not received dividends. It would be [(6,6001,400) 1,400)/1400]x100 percent. This amounts to an increase of 371 percent over 5 years, with an average of 74 percent per year.

However, if you have received dividends, the result may alter. Imagine you earned the equivalent of a dividend of $60 per year in the last three years, which could be an additional $180. If you received $6,780, include this figure in your final investment value. When you divide this number by $1,400, and then multiply the result by 100 percent, your total ROR will be 484.29 percent over the course of five years, and an average of 96.86 percent per year.

Bottom Line on ROR

It pays to learn the fundamentals of investing in stocks, such as calculating the return on investment. This will allow you to predict how the stock will perform in the coming. Also, you can use these types of calculations or investment calculators to determine whether different investments have produced or lost money in a specified period. It will also help you decide whether to hold the investments or dispose of them. You can also calculate the capital gains and capital gains tax.

You can also utilize other metrics like the rate of cashflow returns (IRR) or internal rate to get more information about past and current stock performance to make educated investment decisions and predict the future results. Additionally, you can use return on assets as well as compound annual growth rate (CAGR) as well as the return on equity valuation.