How to Calculate Investment Returns ?

Calculating investment returns involves determining the percentage gain or loss on an investment over a specific period. Here’s a general method to calculate investment returns:

  1. Determine the Initial Investment: Identify the amount of money you initially invested in the asset or investment.
  2. Determine the Final Value: Determine the current or final value of the investment. This can be the current market value of stocks, the maturity value of a bond, or the selling price of a property, for example.
  3. Calculate the Gain or Loss: Subtract the initial investment from the final value to determine the gain or loss. If the result is positive, it represents a gain, while a negative result indicates a loss.Gain/Loss = Final Value – Initial Investment
  4. Calculate the Return as a Percentage: Divide the gain or loss by the initial investment and multiply by 100 to calculate the return as a percentage.Return on Investment (ROI) = (Gain/Loss / Initial Investment) * 100

Here’s an example to illustrate the calculation:

Let’s say you invested $10,000 in stocks, and after a year, the value of your investment grew to $12,000.

Gain/Loss = $12,000 – $10,000 = $2,000

ROI = ($2,000 / $10,000) * 100 = 20%

Therefore, in this example, your investment return would be 20%.

It’s worth noting that this calculation doesn’t consider additional factors such as transaction costs, fees, dividends, or the time period for which the investment was held. For a more accurate representation of investment returns, you may need to consider these factors or use more advanced calculations such as the Compound Annual Growth Rate (CAGR) for longer-term investments.

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