How to Determine an Investment's Percentage Gain or Loss

Knowing how to calculate the percentage gain on your investment is essential for any investor. It's a simple process: just subtract the original purchase price from the selling price to find the gain or loss. If you don't have the original purchase price, you can ask your broker for it.

They will have all the details, including the purchase and sale price, on record. By understanding your percentage gain, you can make informed decisions about your investments and track your financial performance. So, it's a key piece of information for any investor to have in their toolbox.

Determining percentage Gain or Loss

To calculate the percentage gain or loss on an investment, subtract the initial purchase price from the selling price to find the gain or loss.

Then, divide this number by the original purchase price and multiply by 100 to find the percentage change in the investment.

This will give you an idea of how well your investment is performing and help you make informed decisions about your financial portfolio.

A loss on the investment occurs if the percentage turns out to be negative since the market value is less than the original purchase price, also known as the cost basis.

There has been a profit on the investment if the percentage is positive since the market value or selling price is higher than the initial purchase price.

Formula for calculating percentage gain or loss

Investment percentage gain = price sold−purchase / purchase price) × 100

The financial equivalent of the gain or loss in the numerator will be calculated as a percentage gain or loss.

To get a decimal, the dollar amount of the gain or loss is divided by the initial purchase price. The decimal denotes the amount of the gain in relation to the initial investment.

Simply moving the decimal place to the right after multiplying by 100 results in the percentage gain or loss relative to the initial investment.

Without selling the investment, a very similar computation must be used to establish the percentage gain or loss. The selling price would be replaced with the current market price. As a result, the gain (or loss) would be unrealized because the investment had not yet been made.

Why calculating percentage gain or loss is important

Calculating the percentage gain or loss on an investment helps to understand the relative success of the investment. It allows for comparison of the amount earned compared to the amount initially invested.

For instance, if two investors both earn $500 from the same stock, it might seem like they both had the same level of success. However, if one investor spent $20,000 on the stock while the other only spent $10,000, the second investor actually performed better because they had less money at risk.

This is why calculating the percentage gain or loss is important - it allows for a more accurate assessment of the investment's performance. Additionally, if an investor has a higher percentage gain, they can potentially re-invest the excess capital into another opportunity for additional gain.