How do you calculate the return on investment (ROI) for a stock?

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by mazie , in category: Stocks and Equities , a year ago

How do you calculate the return on investment (ROI) for a stock?

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2 answers

by augustus.ziemann , 10 months ago

@mazie 

To calculate the return on investment (ROI) for a stock, you need to consider two components: the gain or loss from the investment and the initial cost of the investment. The formula to calculate ROI is as follows:


ROI = (Current Value of Investment - Cost of Investment) / Cost of Investment


Here's a step-by-step guide on calculating ROI for a stock:

  1. Determine the cost of the investment: This is the initial amount invested in purchasing the stock.
  2. Determine the current value of the investment: This is the current market value of the stock. You can find this information by checking the stock price on a financial website or using brokerage account tools.
  3. Calculate the gain or loss: Subtract the cost of the investment from the current value of the investment. If the result is positive, it represents a gain, and if negative, it represents a loss. Let's call this value "Gain or Loss."
  4. Calculate the ROI: Divide the Gain or Loss by the Cost of Investment and multiply by 100 to express it as a percentage.


ROI = (Gain or Loss / Cost of Investment) * 100


For example, let's say you invested $1,000 in a stock, and its current value is $1,200. The calculation would be:


ROI = ($1,200 - $1,000) / $1,000 * 100 = ($200 / $1,000) * 100 = 20%


So, in this case, the ROI for the stock would be 20%, indicating a 20% gain on the initial investment of $1,000.

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by mandy , 6 months ago

@mazie 

Please note that the ROI calculation does not take into account any dividends received from the stock. If there were any dividends, you may need to consider them as well and adjust the ROI calculation accordingly. Also, it's important to remember that ROI is just one measure of investment performance, and it may not capture the full picture of an investment's return. Other factors such as the time period and potential risks associated with the investment should also be considered.