How do you figure out how much you've lost
or gained on your investments whether it be
a stock or an overall portfolio? Hi, I'm Jimmy
Chang, I've been teaching college mathematics
for almost a decade and we're here to calculate
the rate of return which gives you a glimpse
as to how well your investments are doing,
whether it be positive or negative. And it's
actually a very straight forward formula in
that you need two things. Number one, you
need your current value, how much your investments
are worth, individually or collectively and
how much you purchased the investments at.
Because the formula goes something like this.
You take the current value of your investment,
how much your stock is worth currently, subtract
it by the original value, how much you purchased
it at and divide it by the original value
which is what you had again up in the numerator.
And here's a basic illustration as to how
this formula is applied. Suppose your stock
currently is thirty four dollars and twenty
five cents and supposed that you had purchased
it at twenty nine fifty. What you would do
is you would take the thirty four twenty five
subtract it by the twenty nine fifty and then
of course your denominator is the same as
your original value. Now using a calculator
to do this is going to be a little bit more
straight forward. When you do the subtraction
you're going to find out that the numerator
is going to be four dollars and seventy five
cents. In this case you've gained four dollars
and seventy five cents. But to figure out
how much of a percentage gain this is you
divide by twenty nine point five. Now rounding
to three decimal places you're going to get
point one six one. Now what does that mean?
Converting it to a percentage gives you more
of a practical idea as to how well the stock
is doing. But converting a decimal to a percent,
just convert it to two decimal places to the
right, move the decimal shift and you're going
to find out that your stock in this particular
case has gained sixteen point one percent
which is actually not bad given today's environment.
So, my name is Jimmy Chang and that is how
you calculate the rate of return.
