How to Compute the Holding Period Return on an Investment

The holding period return calculates your percentage increase while holding your investment.

The holding period return calculates your percentage increase while holding your investment.

The holding period return, or HPR, is one of the simplest investment assessments you can calculate because it disregards the length of the investment to produce an overall return rate of the investment. If all you need is a figure that says how much your money grew, this is the calculation for you. However, this calculation won't let you compare your investment to others because of likely differences in the time frame. As an example, your neighbor may gloat at his 20 percent HPR compared to your 5 percent, but he’ll quickly shut up when he realizes his investment took five years while yours happened overnight.

Add any cash flows obtained from the investment. As an example, if you invested in stock ABC that produced quarterly dividends of $0.50, you received eight such payments per share over the course of two years. This results in a total cash flow of $4 per share. Because HPR calculates a percentage, you do not need to multiply the per share cash flow by the number of shares you own. Keep it simple by staying on a per-share calculation.

Add the cash flows to the holding period's ending investment value. In the example, if stock ABC rose to $125 per share, add $125 plus $4 to calculate a total value of $129 per share.

Divide this figure by the investment's value at the beginning of the holding period. In the example, if you purchased stock ABC for $50, divide $129 by $50 to calculates a multiplier of 2.58.

Subtract one from the multiplier to calculates the HPR in decimal format. In the example, 2.58 minus 1 calculates an HPR of 1.58.

Multiply this figure by 100 to convert it to percent format. In the example, 1.58 times 100 converts the decimal format to a 158 percent return on investment during the holding period.

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