How To Calculate Percent Return

Percent Return Formula:

\[ \% Return = \frac{Ending Value - Beginning Value}{Beginning Value} \times 100 \]

Percent Return (%):

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1. What Is Percent Return?

Percent return measures the percentage gain or loss on an investment relative to its initial value. It is a fundamental metric used in finance to evaluate investment performance over a specific period.

2. How Does The Calculator Work?

The calculator uses the percent return formula:

\[ \% Return = \frac{Ending Value - Beginning Value}{Beginning Value} \times 100 \]

Where:

\( Ending Value \) — Final value of the investment in USD
\( Beginning Value \) — Initial value of the investment in USD

Explanation: The formula calculates the percentage change from the beginning value to the ending value, providing a standardized way to compare investment performance across different asset classes and time periods.

3. Importance Of Percent Return Calculation

Details: Percent return is essential for evaluating investment performance, comparing different investment opportunities, assessing portfolio growth, and making informed financial decisions. It helps investors understand the profitability of their investments in relative terms.

4. Using The Calculator

Tips: Enter the beginning value and ending value in USD. Both values must be positive numbers. The calculator will compute the percentage return, with positive values indicating gains and negative values indicating losses.

5. Frequently Asked Questions (FAQ)

Q1: What is a good percent return?
A: A good percent return depends on the investment type, risk level, and market conditions. Generally, returns above inflation rate (2-3%) are considered positive real returns.

Q2: How does percent return differ from absolute return?
A: Percent return shows the relative performance as a percentage, while absolute return shows the actual dollar amount gained or lost. Percent return allows for better comparison across different investments.

Q3: Can percent return be negative?
A: Yes, if the ending value is less than the beginning value, the percent return will be negative, indicating a loss on the investment.

Q4: Should I include dividends in the calculation?
A: For total return calculations, yes - include all income (dividends, interest) plus capital appreciation. The ending value should reflect the total value including reinvested dividends.

Q5: How does time period affect percent return?
A: Percent return should be annualized for meaningful comparison across different time periods. A 10% return over 6 months is much better than 10% over 2 years.