# Stock return calculator

Calculate stock returns for any stock using Invested Data's stock investment calculator. Select a stock, set a date range and starting balance (optionally use the drip calculator) to return a detailed data report. This stock return calculator has dividend reinvestment plan (DRIP) functionality.

## Calculate Stock Return

When talking about equity investing, one of the most important things is *how to calculate gain or loss on stock*. This is simply looking at how much your stocks rose or fell compared to what it was like before you started investing in them. The easy to use stock tool above is a **stock calculator** with historic & dividend (drip) options.

It’s very easy to focus on the price if a stock investment goes up, but less attention is paid to the price it drops. By ignoring this side of the market, you are leaving money on the table.

By adding together all the dividends that were paid as well as taking into account any **stock dividend announcements**, capital gains, and subtracting costs such as broker fees, we can **calculate stock return per year**.

In the long term, historically stocks have gone up. You can use the stock tool above as a **stock profit calculator** for certain stocks that have increased in value. If the stock has gone down, you can use this stock tool as a **stock loss calculator**.

This gives us our main metric for determining if an investment has done well over time. It looks at whether or not the stock investment increased in value which it usually does with higher earnings and increasing prices.

But what if some years the value decreased? That is when other measures come into play. We will look at two of these next.

## Calculate dollar return

The most common way to calculate stock returns is via what’s called price-return calculations, or simply price returns, to to use the **stock investment calculator** above. Price returns are calculated by taking the difference in price between two time periods and then dividing that number by the price of the investment at the start of the period.

So, for example, if you bought XYZ Company shares for $100 per share back in 2000 and they traded today at $50 per share, your total return would be ($50 – $100) / $100 = 0.5 or 50 percent.

This calculation doesn’t take into account any changes in the overall market value of stocks or dividends, which both matter more broadly than just whether a company goes up or down in its own right.

But it does tell us how much money we made (or lost!) when a company costs less (or more). And *since lower prices typically mean higher returns*, this can *also help identify undervalued companies* that **may offer better long term prospects**.

## Calculate percentage return

One of the most important things to know about investing is how to calculate your stock market return. There are *two main ways* to do this, and it can be confusing which one should be used over another.

The first way is called price-based returns or total shareholder returns (TSRs). This is typically measured by calculating the price index for each company and then adding up all the companies in an asset class. For example, if we were investing in both stocks and bonds, using the Standard & Poor's 500 as our stock investment benchmark, you *would add together* the prices of each stock and bond at their **latest purchase date plus** the difference between those dates to determine TSRs for that period.

This method assumes that the more the price goes up of an individual stock or bond, the better it has done for shareholders. While this makes sense, there are also arguments against this assumption. Some say that companies need to increase profits to keep buying stock so they push up the price higher. This argument is called price manipulation.

Another criticism of this approach is that some large corporations will spend money to make their stock go up even more, making it seem like they are doing well but actually helping to contribute to widening inequality.

A second way to *measure investor performance* is earnings-based returns, or EBRS. Just like with price-based returns, EBRS measures how much money investors have made by comparing what a firm’s income is to its cost of production.

## Calculate growth rate

The second way to *calculate stock return* is to look at how much your investment grew over time. This is called growth rate or *returns per year*.

The growth rate of an investment refers to how much money it made in one year compared to the previous years. For example, if a company that you invested in was able to double its sales each year, its *annual growth rate would* be 200%.

A more common way to think about growth rates is looking at it as **percent growth per year**. A 100% growth means it doubled in size every year, which is very impressive!

But what makes this investment special is not only how well it performed, but also how well it performed when markets were down. When the market goes up, companies do too, so investors benefit from both upward trends and downward trends.

## Calculate future returns

The most important thing to note about stock return calculations is that they are dependent on what time frame you use for your calculations.

The standard way to *calculate average annual total shareholder returns* (TSRs) is to look at how much money an investment returned over a specific period of time. For example, if we were to measure the TSR of Apple over the past ten years, our TSR would be determined by the difference in price between now and ten years ago divided by ten.

This method assumes that *investors bought shares every year* during this time frame which may not always have been the case. Some years there was no dividend or sale, so shareholders lost out.

Another common mistake when calculating TSRs is **using per share information instead** of overall market performance. If a **company issued one million additional shares**, their net income will go up, but their price will drop proportionally. This results in lower TSRs than calculated using per-share data.

There are several reasons why some studies differ from others in terms of definitions and methods.

## Calculate historical returns

When calculating stock return, you should know what period of time you are using to calculate your returns. You can ** use either monthly returns** or yearly returns!

When calculating stock return, you should know what period of time you are using to calculate your returns. You can use either monthly returns or yearly returns!

Monthly returns is when we look at how much money each **company made per month** while holding all stocks for the same amount of time. For example, if a company has been performing well over the past year but has recently experienced a downturn, its monthly return may be lower than it was before.

Yearly returns is when we look at how much money each company made in one whole year while holding all stocks for the same length of time. For instance, Amazon made a lot of money during the past years, so their annual return is higher than their monthly return!

Historical returns is the best way to **determine true shareholder value** because it includes both positive and negative performance periods. It removes bias by looking at data from every source, not just ones that have significant losses. The average investor does not typically do this as they lose track of companies once prices drop.

## Calculate future dollar return

The most common way to calculate stock returns is by using the Dow Jones Industrial Average (DJIA) as an index. By looking at how the DJIA has performed over time, we can determine what kind of returns your investment will achieve in the future.

By taking the average price-per-share for each company in the DJIA and then dividing this average by the current share prices, you have an estimate of how much money each company would make if it were purchased today. This gives us our estimated profit or loss for the year!

We can then take these estimates and add them up to get a total value for the stocks in the DJIA. From here, we can divide this total value by the *current market capitalization* to obtain the **yearly dividend yield**!

This article will use the past ten years’ data to demonstrate how to do this calculation efficiently.

## Calculate future percentage return

The most common way to calculate stock return is by using the standard deviation of price as the base. This can be tricky, because not all stocks have a stable price per share. Some stocks are constantly going up or down, making it hard to determine what the “standard” price is for each share.

Another method that has become popular is **calculating average true shareholder value** (ATV). ATV takes into account both the cost of buying shares and the market capitalization at the time you buy them, as well as how **much money shareholders made** off of investing in the company.

Both of these methods can be used to predict how likely it is that the stock will increase in price, and thus give an indication of its total stock return. By looking at historical data, we can also get a sense of how **much returns typically match** the predicted returns.

## Calculate stock price return

The most basic way to calculate shareholder returns is to use an average cost or *market value per share* and then determine how much each shareholder received in dividends and capital gains. These are called dividend yields and cap gain rates, respectively.

The difference between these **two numbers represents** the net return that shareholders experienced from owning a company for a given time frame. By adding up all of the individual returns, we can arrive at what is known as total shareholder return (TSR).

By this measure, Apple has delivered very strong performance over the **past ten years**. Since January 2001, when it was first included in our TSR calculation, Apple has returned 1,078%!

This includes 547% growth through December 2017, which makes it one of the best performing stocks of all-time.