How to Calculate Stock Profit Percentage

Calculating the profit percentage from stock investments provides a clear measure of investment performance. This metric illustrates the return generated relative to the initial capital invested, offering a standardized way to compare different trades. Understanding this percentage helps investors evaluate their financial decisions and assess how efficiently their capital is growing.

Essential Information for Calculation

Accurately determining stock profit percentage requires gathering specific financial details. The “cost basis” represents the total original cost to acquire the shares, including the purchase price and any commissions or fees paid at the time of purchase. For instance, if shares were bought for $1,000 and a $10 commission was charged, the cost basis would be $1,010.

The “selling price” is the total amount received when the shares are sold. Net proceeds from a sale are affected by transaction costs. Commissions and other fees incurred during the selling process must be subtracted from the gross selling price. These selling-related expenses reduce the actual cash received from the sale.

Determining Your Stock’s Profit or Loss

Calculate the dollar amount of profit or loss by taking the total proceeds from the sale and subtracting the overall cost of acquiring and selling the shares. The formula for this calculation is: (Total Selling Price – Selling Transaction Costs) – (Total Cost Basis). This calculation provides the net dollar gain or loss from the investment.

For example, if shares with a cost basis of $1,010 were sold for $1,200, and selling transaction costs amounted to $10, the net proceeds would be $1,190. Subtracting the cost basis ($1,190 – $1,010) yields a profit of $180. Conversely, if the same shares were sold for $900 with $10 in selling costs, the net proceeds would be $890, resulting in a loss of $120 ($890 – $1,010). A positive result indicates a profit, while a negative result signifies a loss.

Converting Profit or Loss into a Percentage

After determining the dollar amount of profit or loss, convert this figure into a percentage. This percentage provides a clear representation of the return on the initial investment. The formula for calculating the stock profit percentage is: (Dollar Profit or Loss / Original Cost Basis) 100. This method uses the initial capital invested as the baseline for evaluating performance.

Consider a profitable trade where shares were bought with a cost basis of $1,010 and sold for a net dollar profit of $180. The percentage profit is calculated as ($180 / $1,010) 100, which equals approximately 17.82%. This percentage allows for direct comparison with other investment opportunities, regardless of the initial dollar amount.

For a losing trade, such as a $120 dollar loss incurred on a $1,010 cost basis, the calculation is ($-120 / $1,010) 100. This results in a negative percentage of approximately -11.88%. A negative percentage indicates a loss relative to the original investment. This percentage figure is useful for understanding the magnitude of the loss in proportion to the capital risked.