Investing in common stock allows you to purchase a small fraction of a company and watch your investment grow as the company profits. Common stock generates returns not only by growing, but also through paying dividends -- so account for both when figuring the rate of return it earns.
Subtract the price you paid for the stock from the selling price. If you still own the stock, use the current price instead. For example, if you paid $30 and it's now worth $33, subtract $30 from $33 to get a gain of $3.
Add any dividends received while you owned the stock to the gain from the price increase. In this example, if you received another $1.50 in dividends while owning the stock, add $1.50 to $3 to find your total gain is $4.50.
Divide your gain by the price you paid for the stock to calculate your rate of return. In this example, divide $4.50 by $30 to find the rate of return equals 0.15, or 15 percent.
- Comstock/Comstock/Getty Images
- Taxable vs. Non-Taxable Interest-Rate Calculations
- How to Calculate the Effective Interest Rate for Discounted Bonds
- SEC Yield Vs. Yield to Maturity
- What Are the Potential Faults in Using the IRR as a Capital Budgeting Technique?
- How Is Daily Periodic Interest Rate Calculated?
- How to Calculate Growth Rate in Dividends
- How to Calculate What You're Willing to Pay if the Interest Rate Drops on a Bond
- Do I Pay Any Taxes on a House I Sell That Was Given to Me Through a Living Trust?
- How to Calculate the Value of a Pension
- How to Calculate How Much 401(k) I Will Have When I Retire