How To Calculate the Percentage Gain or Loss on an Investment

Reviewed by Robert C. KellyFact checked by Jiwon MaReviewed by Robert C. KellyFact checked by Jiwon Ma

What Is the Percentage Gain or Loss?

The percentage of gain or loss on an investment indicates how much your investment had grown or fallen in value when you sold it. It reflects the performance of your investment and can also provide insight into the success of your investment strategy.

Calculating the percentage gain or loss is straightforward and quite easy. To do so, you must determine what you gained (or lost) when you sold your investment. So, first you need to know how much the investment originally cost (the purchase price). Then you’ll subtract that original cost from the price at which you sold the investment for the amount of your gain or loss.

If you don’t have the original purchase price, you can obtain it from your broker. Brokerage firms provide trade confirmations for every transaction electronically or in paper form. They also provide statements of account activity. Both should show you the original purchase price and the sale price, as well as the financial details of the investment.

Key Takeaways

• In calculating the percentage gain or loss on an investment, investors need to first determine the original cost or purchase price.
• Next, the purchase price is subtracted from the price at which the investment was sold to arrive at the gain or loss on the investment.
• Take the gain or loss from the investment and divide it by the original cost of the investment or purchase price.
• Finally, multiply the result by 100 to get the percentage change in the investment.

Formula for Percentage Gain or Loss

Investment percentage gain=purchase pricePrice sold−purchase price​×100

The percentage gain or loss calculation above produces a percentage that represents an increase (your gain) or decrease (your loss) from the original investment.

The dollar amount of the gain or loss is divided by the original purchase price and multiplied by 100 to obtain the percentage.

You can also calculate an unrealized gain or loss (that is, a gain or loss that you haven’t realized yet because you still own your investment). Just substitute the current market price for a selling price.

If the percentage is negative, then the selling price is lower than the original purchase price (also called the cost basis) and there’s a loss on the investment.

If the percentage is positive, the selling price is greater than the original purchase price and there’s a gain on the investment.

Why Percentage Gain or Loss Is Important

The percentage gain or loss goes beyond the dollar amount of the gain or loss in giving you information about the result of your investment. For instance, a $150 gain on an investment amount of $500 is a 30% gain. But if you made $150 on an investment of $1000, your percentage gain would be 15%.

So the percentage gain provides you with a better idea of the success of your investment than dollar amounts alone might. And it gives you a clearer method of comparing the performances of all your investments. You may also find it useful to look at percentage gains or losses when comparing potential investments.

Examples of Calculating Percentage Gain or Loss

The percentage gain or loss calculation can be used for many types of investments.

Stock

Let’s say an investor bought 100 shares of Intel Corp. (INTC) at $30 per share, which means that the initial investment cost $3,000 ($30 x 100).

The 100 shares were sold for $38 per share, which means that the sale proceeds would be $3,800 ($38 x 100). The dollar value of the gain on the investment is $800 ($3,800 – $3,000).

The percentage gain calculation would be:

• ($3,800 sale proceeds – $3,000 original cost) / $3,000 = 0.2667 x 100 = 26.67%.

Alternatively, the percentage gain can be calculated using the per-share price, as follows:

• ($38 selling price – $30 purchase price) / $30 = 0.2666 x 100 = 26.67%.

Index

If an investor wanted to determine how the Dow Jones Industrial Average (DJIA) has performed over a certain period, the same calculation would apply. The DJIA is an index that tracks 30 stocks of the most established companies in the United States.

Let’s say that the Dow opened at 24,000 and closed at 24,480 by the end of the week.

The percentage gain calculation would be:

• (24,480 – 24,000) / 24,000 = 0.02 x 100 = 2%

Fees And Dividends

Investing does not come without costs, and this should be reflected in the calculation of percentage gain or loss. The examples above did not consider broker fees and commissions or taxes.

To incorporate transaction costs, reduce the gain (selling price – purchase price) by the costs of investing.

Fees

Using the Intel example above, let’s say that the investor was charged $75 in fees from the broker. The percentage gain would be calculated as follows:

• (($3,800 sale proceeds – $3,000 original cost) – $75) / $3,000 = 0.2416 x 100 = 24.16%.

We can see that the brokerage fee reduced the percentage rate of return on the investment by more than 2% or from 26.67% to 24.16%.

Dividends

If the investment paid out any income or distributions, such as a dividend, the amount would need to be added to the gain amount. A dividend is a cash payment paid to shareholders and is configured on a per-share basis.

Using the Intel example, let’s say the company paid a dividend of $2 per share. Since the investor owned 100 shares, Intel would pay $200 split up evenly into four quarterly payments.

The percentage gain would be calculated as follows:

• (($3,800 sale proceeds – $3,000 original cost) + $200) / $3,000 = 0.3333 x 100 = 33.33%.

Assuming there were no brokerage fees and the stock was held for one year, we can see that the dividend increased the percentage rate of return for the investment by more than 6% or from 26.67% to 33.33%.

If the stock wasn’t held for one year and, instead, was held for two quarters, we would add $100 to the gain amount (instead of $200) since the quarterly dividend payments would be $50 each.

By incorporating the transaction costs, account fees, commissions, and dividend income, investors can obtain a more accurate representation of the percentage gain or loss on an investment.

Why Do I Need To Understand the Percentage Gain or Loss of an Investment?

Understanding the percentage gain or loss of a security helps investors determine the significance of a price movement. Investors can use percentage change to compare an investment’s historical performance or as a measure of relative strength or weakness when comparing an asset to its peers. Percentage gain or loss also helps investors determine a security’s volatility by the size of its change.

Is It Hard To Calculate an Investment’s Percentage Gain or Loss?

No, it’s not. Start by subtracting the purchase price from the selling price. Then take that gain or loss and divide it by the purchase price. Finally, multiply that result (a number in decimal form) by 100 to get percentage change. If you haven’t sold the investment but still want an idea of a return, you can calculate the unrealized percentage change by using the current market price for your investment instead of a selling price. 

What Are Useful Percentage Figures For Investors To Know?

A stock or stock market correction is often defined as a 10% decline from the stock’s or index’s most recent peak. A bear market is often said to have begun when the market declines by 20%. While there is no specific threshold for stock market crashes, they are generally considered to involve an abrupt double-digit percentage drop in a stock or index over a short time frame.

What Other Factors Should I Consider When Calculating an Investment’s Percentage Gain or Loss?

The publicly quoted percentage change of a security does not factor in fees, such as commissions, slippage, and holding costs. Investors should factor these into their calculations for a more accurate representation of an investment’s percentage gain or loss. Similarly, investors should add distribution payments, such as dividends into their percentage calculations to help determine an investment’s total returns.

The Bottom Line

Understanding the percentage gain or loss of an investment helps investors make performance comparisons and assess risk.

Calculating a security’s percentage change is straightforward, requiring only the purchase and sale prices. Investors can determine unrealized percentage movements by replacing the sale price with the current market price.

For a better representation of an investment’s percentage gain or loss, investors should factor in costs such as commissions, as well as income received from distributions like dividends.

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