Calculate the average return on a stock - a beginner's guide

Hello, friends. Today we're going to talk about "calculating the average return on a stock" for beginners who are just starting to invest in stocks. Calculating stock returns can seem complicated, but if you follow along, it won't be difficult to understand. Let's get started.

What is a stock return?

First, let's understand what a "stock return" is. Simply put, stock returns are the percentage of gains you make from investing in stocks. In other words, it's a metric that shows how much money you made for the money you invested.

How to calculate stock returns

There are two main ways to calculate stock returns. The first is to calculate the 'simple return' and the second is to calculate the 'annualized return'.

Calculating simple returns

The simple return is the most basic way to calculate returns, and uses the following formula:

Simple rate of return = (present value - money invested) / money invested * 100.

For example, if you invested $1 million and earned $1.2 million, your simple rate of return would be calculated as follows

Simple rate of return = (1.2 million won - 1 million won) / 1 million won * 100 = 20%.

Calculating annualized returns

The annualized rate of return is a rate of return that takes into account the investment period, and uses the following formula

Annualized Rate of Return = ((Present Value / Money Invested) ^ (1 / Investment Period) - 1) * 100

For example, if you invested 1 million won and got 1.2 million won after one year, the annualized rate of return would be calculated as follows

Annualized rate of return = ((1.2 million won / 1 million won) ^ (1 / 1 year) - 1) * 100 = 20%

Calculate the average rate of return

The average return is calculated by adding up the returns from multiple trades and dividing that number by the number of trades.

Average return = (return1 + return2 + ... + returnn) / n

For example, if you had five trades that yielded returns of 10%, 20%, -10%, 30%, and -20%, respectively, the average return would be calculated as follows

Average return = (10% + 20% - 10% + 30% - 20%) / 5 = 6%.

As you can see, calculating stock returns may seem complicated, but it's actually a simple calculation. For beginners who are starting to invest in stocks, this rate of return will help them measure their investment performance and modify their investment strategy.

So, good luck with your investments!

---.

This concludes our post on "Calculating the average return on a stock". Next time, we will dive into more in-depth investing knowledge. Let's learn and grow as investors together. Thank you!

---

Utilslib Calculator

Go to the Average Price Calculator: Average Price Calculator