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If you’re not sure how stock return calculator , even the most trusted sites for stocks won’t provide you with an estimate of what your investment is worth over a particular amount of time. You can also learn about the various factors that impact stock returns to help you calculate the value of the stock for the future.

What is the stock rate of Return?

According to IG International Limited the rate of return (ROR) is the amount of income an investment like stocks or real estate earns over a certain time. It’s typically an annual period of one year and is determined by dividing the initial investment.

The most common way to express this is in percentages, which can be either positive or negative. Additionally, the total return after a certain time frame gives a better understanding of how the securities perform as they usually differ in their value. While rate of return may be referred to as return on investment (ROI) by some, they’re actually two separate terms.

The return rate on stocks is the annual income that your stocks generate compared with the initial investment made at the time you bought them through the stock market. Therefore, the initial value of the stock as well as the final value are both important. The value of money over time, however, is not considered.

The most common rate of return formula is:

ROR = (Final investment value-Original investment value/Original investing value) 100 percent

However, it is crucial to be aware of the differences between stocks and shares even though some people like to refer to them as the same when discussing investments in stocks. This understanding is vital when you calculate your return on your investment.

Investor.gov defines the term “stock” as a security that gives you an ownership share of the company to which it is held. On the other hand shares are the most total unit of a company you have. Thus, your company’s stock is made up of the exact number of shares you accumulate over time. Be aware that stocks are typically referred to publicly traded companies and shares to ownership units.

For example, if you claim to have 20 shares, someone is likely to ask you to name the company that owns the shares you own. If, however, you state that you own 20 stocks, people is likely to ask you to list the different companies that you have bought shares in.

Factors that Affect Stock ROR

The factors that impact the outcome you will get after using the stock rate of return formula are:

The dividends received in total in the calendar year, or the period of time specified.

the number of shares that you have in a stock of a company

The current market value for shares of a company

The purchase price of your shares or the cost at which you purchased them

Calculating the return rate on stocks

This guideline will assist you stock market return calculator in an excel spreadsheet or manually if do not have access to a rate of return calculator. Do bear in mind that these numbers are just estimates and could not be representative of average rates of return in reality.

If you are looking to determine the return rate on the stock of the company ABC for the past five years. You will need to calculate the cost of purchase for the shares you’ve purchased throughout the years, and then add them together. You can refer to the original receipt in the event that you have it. But, your brokerage account statement could be used. Taxes for Expats also states that you are able to search for the details online based on the date that you bought the shares.

You can determine the value of your investment once you know how many shares were purchased at certain prices. If you purchase 100 shares of ABC company for $1.50 per share during an economic recession and then later purchase 500 shares at $2.50 within a short time your investment total is (100×1.5) + (500×2.5), which equals $1,400.

Find out the market price for each ABC company share (which could also be the price you have just sold shares), and multiply that number by total number of shares. Let’s say your company’s shares are valued at $11 per share after five years. In that case, that will be 600 shares multiplied by $11 for the final value of $6,600.

If you have never received any dividends, then you can calculate the ROR at this point. It is x100 percent. This is equivalent to a gain in excess of 371 percent over 5 years, with an average return of 74 per year.

However, if you have received dividends, the result may be different. Suppose you received the equivalent of a dividend of $60 per year over the last three years, which could be more than $180. In that case, you should add the amount to your final investment value for a new total of $6,780. Divide that number by $1.400 and multiply it 100 percent. The new ROR is 484.29 percent for the next five years and the average is 96.6 percent per year.

ROR The Bottom Line

It pays to learn the fundamentals of investing in the stock market, like how to calculate the ROI. In this way, you can determine how the stock will perform in the future. It is also possible to use these calculations and investment calculators to see the extent to which investments have made profit or lost money in a particular time. This allows you to decide whether to keep the investments or to throw them away. You can also calculate the capital gains and capital gains tax.

However, you can utilize other measures, like the cash flow rate of return or internal rate of return (IRR) to get an accurate view of the present and past performances of stocks to predict future outcomes and make investment decisions. And you can also use return on assets, compound annual growth rate (CAGR), and returns on equity valuation metrics.