How to calculate gain or loss on stock
In the world of stock trading, it’s important to understand how to measure the success of your investments. One key metric is calculating the gain or loss on your stock holdings. Knowing how to calculate gains and losses will not only help you make smarter investment decisions but also manage taxes better. In this article, we will guide you through the process of calculating the gain or loss on your stocks.
Step 1: Calculate Initial Investment
The first step in calculating your gain or loss is determining the cost of your initial investment. This includes the price of the stock when you bought it and any additional broker fees and commissions incurred.
Initial Investment = (Number of Shares Purchased * Purchase Price per Share) + Broker Fees
Step 2: Determine Current Value
Next, determine the current value of your stock holding. This requires knowing how many shares you own and their current market price.
Current Value = Number of Shares Owned * Current Market Price per Share
Step 3: Calculate Gain or Loss
Now that we have both initial investment and current value, we can calculate the gain or loss on our stocks. To do that, simply subtract the initial investment from the current value.
Gain or Loss = Current Value – Initial Investment
If this number is positive, you have made a profit on your investment. If it is negative, then you have incurred a loss.
Step 4: Calculate Percentage Gain or Loss
For a better understanding of how well your investment has performed over time, it’s helpful to calculate the percentage gain or loss as well. This can be done by dividing the absolute gain or loss by your initial investment and then multiplying by 100.
Percentage Gain or Loss = (Gain or Loss / Initial Investment) * 100%
Calculating gain or loss on stock allows investors to evaluate their investment performance objectively, aiding in making informed decisions regarding the continuation, adjustment, or termination of a stock holding. By knowing how to calculate gain or loss on your stocks, you’ll be better equipped to analyze your investments’ performance and make smarter financial choices in the long run.