Stock Return Calculator

What this stock return calculator does

Making 3,960 on a share position is a fact. Whether it was a good investment depends on how much you put in, how long it took, and what the tax authority took at the end. Those three things turn a number into something you can compare against anything else you might have done with the money.

This calculator does that conversion. Give it your purchase and sale prices, the fees at each end, the dates, your share count and a capital gains tax rate, and it returns a table of eight figures: your gain, your total return, your simple annual return and your compound annual return, each shown before and after tax.

Most stock calculators give you one return figure. Giving four, in two tax states, is genuinely more useful, and the difference between the simple and compound rows is the thing most worth understanding. That has its own section.

The fields are labelled in $and the arithmetic is currency blind. Everything runs in your browser and nothing is stored.

How to use it

1. Purchase Price. Price per share when you bought.
2. Purchase Fee. Total brokerage on the buy, as an amount rather than a percentage.
3. Purchase Date. When you bought.
4. Sale Price and Sale Fee and Sale Date. The same three for the other end.
5. Shares Owned. How many.
6. Capital Gain Tax Rate. Your rate as a percentage. Enter 0 if the gain is untaxed where you are, or if it is inside a tax sheltered account.

Press Calculate. Press Reset to clear it.

Two things to watch. The fees are amounts, not percentages, unlike our stock calculator which works in percentages. And both dates need filling in properly, because a missing or equal date leaves the tool with no time period to annualise over and the result will not make sense.

What each row of the results means

The table has four rows and two columns, and the rows answer progressively more useful questions.

Gain or Loss. The money. Total sale proceeds after the sale fee, minus total purchase cost including the purchase fee.

Return on Investment. That gain as a percentage of what you put in. This is your total return across the whole holding period, however long that was, so a 79 percent return over five years and a 79 percent return over five months are the same number here.

Simple Annual ROI. The total return divided by the number of years. It answers "what did this average per year" in the most direct way, and it slightly flatters every investment held longer than a year.

Compound Annual ROI. The rate that, compounding each year, would actually have got you from your starting value to your ending value. This is the CAGR, and it is the figure fund managers and analysts use because it is the one that can be compared like for like against anything else.

The before tax column ignores tax entirely. The after tax column applies your rate to the gain and recalculates all four figures from the reduced amount.

A worked example

50 shares bought at 100 with a 20 fee, sold five years later at 180 with a 20 fee, taxed at 15 percent.

Total cost: (100 × 50) + 20 = 5,020

Total proceeds: (180 × 50) − 20 = 8,980

Gain: 8,980 − 5,020 = 3,960

Return on investment: 3,960 ÷ 5,020 = 78.88 percent

Now annualised, both ways:

Notice the two things that happened to a headline gain of 3,960. Tax took 594 of it, and the honest annual figure is 12.33 percent rather than the 15.78 percent that dividing by five suggested. Between them, a number that started as "nearly 79 percent" becomes "about 11 percent a year after tax", which is a much more useful thing to compare against a savings account or an index fund.

Simple annual and compound annual are not the same

This is the distinction the tool exists to make, and the gap is larger than most people expect.

Simple annual return divides the total return by the years. Easy, intuitive, and it overstates.

Compound annual return asks what steady annual rate would actually have produced the result, allowing for the fact that each year's growth builds on the last.

CAGR = ((1 + total return)^1/years − 1) × 100

Why the simple version overstates: if something doubles over two years, the simple calculation says 50 percent a year. But 50 percent a year compounding turns 100 into 225, not 200. The rate that actually doubles money in two years is 41.42 percent.

The overstatement is largest on short holdings with big returns, which is exactly where people are most tempted to quote an annualised figure. Somebody who made 100 percent in two years and describes it as "50 percent a year" is overstating their performance by more than eight percentage points.

Use the compound row when comparing against anything else, because that is what every fund, index and savings product quotes. Use the simple row only if you specifically want to know the average yearly gain in flat terms.

That compound row also has another name you may recognise. It is the same arithmetic our savings interest rate calculator uses to solve for a required rate, run in the opposite direction.

Price return and total return

This calculator measures what you made from the share price moving. If the company paid you dividends along the way, they are not in here, and you should add them yourself for a complete picture.

The distinction has names. Price return is the capital gain alone, which is what this computes. Total return adds dividends received, and for income paying shares held over long periods it is a substantially larger number.

The simple adjustment: add the total dividends you received to your sale proceeds before working out the gain. So if our example paid 400 in dividends across the five years, the gain becomes 4,360 rather than 3,960, the total return becomes 86.85 percent, and the compound annual figure rises accordingly.

Two refinements if you want to be precise about it. Dividends received early in the holding period are worth more than the same amount received at the end, so simply adding them slightly understates. And if you reinvested dividends into more shares, you did not receive cash at all, you increased your position, which changes both your share count and your cost basis. In that case the cleanest approach is to treat each reinvestment as another purchase and work out a fresh average with our stock average calculator first.

Dividends are also usually taxed differently from capital gains, often at their own rate and in the year received rather than at sale. The single tax rate field here cannot separate the two, so if dividends are a meaningful part of your return, work them out separately.

How the tax figure is applied

The after tax column takes your gain, removes your stated percentage, and recalculates everything from what is left. Simple and transparent, and worth understanding the assumptions inside it.

One flat rate. The same percentage applies regardless of how long you held. Many countries do not work that way. In the United States the dividing line is one year: hold longer and the gain is long-term at preferential rates, hold a year or less and it is short-term at your ordinary income rate. If your holding period straddles that line, use the rate that actually applies to you rather than a blended guess.

Fees already reduce the taxable gain. Because the tool computes the gain net of both fees before applying tax, it is treating your costs as part of your basis and proceeds, which is generally how tax authorities treat them too.

Losses get the same treatment in reverse. If your gain is negative, the after tax column shows a smaller loss, which implicitly assumes you can offset that loss against other gains and get relief at the same rate. Often you can, subject to rules about how much and when. If you cannot, read the before tax column instead for a loss.

Nothing about accounts. Shares held in a pension, ISA, 401(k) or equivalent are usually taxed differently or not at all at the point of sale. Enter 0 in that case.

How the holding period is measured

The tool takes the gap between your two dates and converts it to years by dividing by 365. That figure then drives both annualised rows, so it matters.

A couple of practical notes. Dividing by 365 rather than 365.25 slightly overstates the number of years, which slightly understates your annualised return. Over five years the effect is about three thousandths of a year, which will not change any decision you make.

More importantly, both dates need to be filled in and the sale must come after the purchase. Leave one blank, or enter a sale date before the purchase date, and the period is either meaningless or negative and the annualised figures will be nonsense. If your results look wildly wrong, the dates are the first thing to check.

If you bought and sold on the same day there is no period to annualise over at all. The total return figure is still valid; the annual rows are not.

One further note for United States taxpayers on where the holding period line falls. The IRS counts from the day after you acquired the asset, up to and including the day you disposed of it. So the one year boundary between short-term and long-term treatment sits a day later than most people assume, and a sale on the anniversary of a purchase is short-term.

Questions people ask

Which return figure should I actually use?

Compound annual, after tax, if you want to compare this investment against anything else. That is the number every fund and index quotes.

Why is the compound figure lower than the simple one?

Because compounding builds on itself, so a lower rate gets you to the same place. Doubling in two years is 41.42 percent compounding, not the 50 percent that dividing by two suggests.

Where do I put dividends?

There is no field for them. Add the total you received to your sale price, spread across your shares, or work them out separately. See the section above.

Are the fee fields percentages?

No, amounts. Enter your total brokerage for each side as a sum. Our stock calculator takes percentages instead if that suits your broker better.

What if I made a loss?

Everything still works and the figures come back negative. The after tax column will show a smaller loss, which assumes you can claim relief on it.

I held it for three months. Is the annualised figure meaningful?

Arithmetically yes, practically be careful. Annualising a short period projects a few months of performance across a whole year, and a good quarter is not an annual rate. Read the total return figure instead.

What tax rate should I enter?

The one that applies to your gain where you live, which may depend on how long you held. Enter 0 for a tax sheltered account.

References

A note on sourcing. The compound annual growth rate is a standard time value of money result. The tax treatment described, including the one year holding period line and the convention for counting it, is set out by the Internal Revenue Service and applies to United States taxpayers only.

1. Internal Revenue Service, Topic No. 409, Capital Gains and Losses. https://www.irs.gov/taxtopics/tc409
2. Internal Revenue Service, Stocks (Options, Splits, Traders). https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/stocks-options-splits-traders
3. OpenStax, Principles of Finance, Section 7.2, Time Value of Money Basics. https://openstax.org/books/principles-finance/pages/7-2-time-value-of-money-tvm-basics
4. Internal Revenue Service, Publication 550, Investment Income and Expenses (Including Capital Gains and Losses).