How to calculate the return on a stock
The gain is the difference between the sale price and the purchase price times the number of shares, plus dividends received, minus fees and taxes. The total return divides the gain by the capital invested: purchase price times shares, plus fees.
- Total return = [(sale − purchase) × shares + dividends − fees − taxes] ÷ capital invested
- Annualized return = (1 + total return)^(1 ÷ years) − 1: the compound annual rate that leads to the same result
Example
You buy 100 shares at $50 ($5,000) with $10 in fees and sell them 3 years later at $65, after receiving $4 of dividends per share. The gain is $1,500 on the price plus $400 of dividends minus $10 of fees: $1,890, or 37.7% of the $5,010 invested. That is 11.3% per year.
Why the annualized return matters
A 40% gain over two years and a 40% gain over eight years are not the same. The annualized return makes them comparable with each other and with a savings account, a bond or a stock index.
Taxes
Tax rates on capital gains and dividends depend on the country, and often on the holding period and income. The calculator applies the rate you enter to the overall gain, if positive; it does not account for losses carried forward or foreign withholding on dividends.