What Are Stock Gains and Losses?
Gains are an increase in an asset's market value from its purchase price, while losses are a decrease in market value from its purchase price. There are two types of gains and losses: realized and unrealized. Unrealized gains and losses occur while you still own the asset. They are realized (brought into reality) when you sell the investment, resulting in an actual gain or loss of capital.
Gains occur whenever an asset's current price is higher than the price at which it was originally purchased. So, if you bought a share of Amazon (AMZN) stock on Sept. 3, 2013, at $13.23 and held it until May 11, 2020, you would have experienced an unrealized gain, as the stock closed at $120.45.
When you incur a loss, it means the current value of an asset or investment is lower than the price at which it was originally purchased. So, if you bought a single share of AT&T (T) stock on May 10, 2021, for $32.63 and sold it at $22.17 on Dec. 15, 2021, you'd have a realized loss.
Key Takeaways
- To calculate your profit or loss, subtract the current price from the original price, also called the "cost basis."
- The percentage change takes the result from above, divides it by the original purchase price, and multiplies that by 100.
- A stock profit may not mean much unless you know how much you need to invest to make that amount of money.
- Many websites calculate gains or losses, or you can set up a spreadsheet to do it for you.
Formula for Gains and Losses
To find the netgainorloss experienced for any stocks you hold, determine the difference between the total price you paid for them and the amount you received when you sold them. The result of the loss or gain calculation will be a percentage.
You calculate gains and losses using the price you paid—including all fees, commissions, and other expenses—and its market value when you sell it. This total price, for the purpose of this example, can be considered the original purchase price.
To calculate your gain or loss, subtract theoriginal purchase pricefrom thesale priceand divide the difference by the purchase priceof the stock.Multiply that figure by 100 to get the percentage change.
Net Gain or Net Loss = [ (Current Price - Original Purchase Price) ÷ Original Purchase Price ] x 100
Calculating Gains and Losses
To calculate your gains or losses, fill in the formula with your information. For simplicity, the calculation below excludes other costs and profit elements, such as dividends received, brokerage fees, and income taxes.
Using the previous Amazon figures:
- Purchase price: $288.80
- Sale price: $2,409.78
- ($2,409.78 - $288.80) ÷ $288.80 = 7.344
- 7.344 x 100 = 734.4%
You'd have realized a gain of 734.4% for a single Amazon share.
The AT&T stock figures:
- Purchase price: $32.63
- Sale price: $22.17
- ($22.17 - $32.63) ÷ $32.63 = -.3205
- -.3205 x 100 = -32%
You'd have a loss of 32% for a single AT&T share.
Gains and losses are categorized by the Internal Revenue Service (IRS) as long-term and short-term gains and losses. Long-term gains are realized after holding assets for more than a year while those deemed short-term are realized after being held for less than 12 months.
Dollar Value Profit or Loss
Some investors only use the dollar value of their returns to gauge profitability, but here is why percentage return figures are much more useful.
Imagine an investor buys 100 shares of Cory's Tequila Company at $10 per share for a total investment of$1,000. Suppose they sell those shares for $1700 ($17 per share) two months later, which means their profit for the trade is $700.
Suppose the investor also bought 1,000 shares in Rob's Sake Distillers at $10 apiece (for a total investment of $10,000) and later sold those shares at $10.70 each for a total of$10,700. The investor gained $700 in this investment as well.
Fees and other costs can eat away at your profits or add to your losses. Make sure you factor them in when you're considering selling any assets.
Calculating Investment Returns
The investment in Cory's Tequila Company was made at $10 per share and sold at $17 per share. The math for Cory's per share percent return is as follows:
- ($17 – $10) ÷ $10 = .7
- .7 x 100 = 70%
Thus, the percentage return on a $10 per share investment is 70%.
The math for Rob's is as follows:
- ($10.70 - $10) ÷ $10 = .07
- .07 x 100 = 7%
An investment in Rob's Sake Distillers would yield a 7% return per share.
So, when the investor compares the dollar value of their investments, it's clear that Cory's was a better investment because it took $10,000 to gain 7% at Rob's, but only $1,000 to gain 70% at Cory's:
Cory's
Outlay: $1,000
Returned: $1,700
Percent Gain: 70%
Rob's
Outlay: $10,000
Returned: $10,700
Percent Gain: 7%
Gains and losses are realized when you actually sell stock. Gains and losses are unrealized if the value changes, but you hold onto the stock within your portfolio.
Tools for Calculating Investment Returns
You can certainly use the formula above to calculate the returns of specific assets. However, there are several tools available to you that can help you tabulate your returns.
For starters, you may want to consider websites that do the calculations for you. The following are just a few of the sites you can visit to calculate the percentage gain or loss for the stocks you hold in your portfolio:
- Gain & Loss Percentage Calculator from Babypips
- Percentage Increase Calculator from OMNI Calculator
- Percentage Decrease Calculator from OMNI Calculator
- Percentage Increase Calculator from CalculatorSoup
- Percentage Decrease Calculator from CalculatorSoup
- Calculator from Percent Change Calculator
Calculating Profits and Losses in Spreadsheets
You can also use software to help you. For example, you can set up your own percentage change calculator using a spreadsheet. Begin by labeling the individual cells in the first columns as follows:
- A1: Final Price
- B1: Purchase Price
- C1: Percentage Change
Input your purchase and final prices into the cells in the following rows:
- A2: Final Price
- B2: Purchase Price
Click on the cell for C2 and type in =(A2-B2)/B2*100. Cell C2 should automatically populate with your percentage change. So, if you use the example of Cory's Tequila Company with an initial investment of $1,000 and the sale netting $1,700, we get a percentage change of 70%.
Keep in mind that you can drag the formula down in Excel to carry it down into further cells.
How Do You Calculate Profit on Stock?
If you want to calculate the profit on a stock, you'll need the total amount of money you used to purchase your stock and the total value of your shares at the current price. You'll also need to know any fees associated with your transactions. So, if you bought 10 shares of Company X at $10 each and sold them for $20 each and incurred fees of $10, you stand to walk away with a profit of $90. Put simply, $200- $100- $10 = $90. Remember that this is just the dollar value and not the percentage change.
How Can I Calculate Long-Term Gain or Loss on Stock?
Long-term gains or losses are realized any time you sell a stock that you've held for more than a year. In order to figure out the gain or loss, you need your purchase and sale price for the stock. Subtract the purchase price from the sale price. A positive result means you have a capital gain while a negative result means you have a loss. Your capital gains tax rate depends on several factors, including your income and filing status.
How Do You Calculate Gain or Loss Percentage on Stock With a Calculator?
You'll need the original purchase price and the current value of your stock in order to make the calculation. Subtract the total purchase price from the current price of the stock then divide that by the original purchase price and multiply that figure by 100. This gives you the total percentage change.
The Bottom Line
Calculating your profit or loss on your stock holdings is a fairly straightforward procedure. It's as simple as calculating the percentage change between a beginning value and an ending value. When calculating your profit or loss, make sure you look at the percentage return as opposed to the dollar value.
