Understanding the percentage profit on an investment is crucial for assessing its success. Whether you're evaluating stocks, real estate, or a new business venture, knowing how to calculate this metric provides valuable insights into your financial performance.
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Calculate Your Investment Profit Now! →What is Percentage Profit on Investment?
Percentage profit on investment is the ratio of profit earned on an investment relative to its original cost. It's expressed as a percentage, making it easy to compare the profitability of different investments. Knowing the percentage change helps in understanding whether your investments are growing as expected.
Formula for Calculating Percentage Profit
The basic formula to calculate percentage profit on investment is:
Percentage Profit = ((Selling Price - Purchase Price) / Purchase Price) * 100
Where:
- Selling Price: The final value you received when selling the investment.
- Purchase Price: The original amount you invested, including any fees or commissions.
Step-by-Step Calculation
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Determine the Purchase Price:
Find the original cost of your investment. For example, let’s say you bought shares for $5,000.
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Determine the Selling Price:
Find the price at which you sold the investment. For instance, you sold the shares for $6,000.
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Calculate the Profit:
Subtract the purchase price from the selling price: $6,000 - $5,000 = $1,000.
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Apply the Formula:
Divide the profit by the purchase price and multiply by 100: ($1,000 / $5,000) * 100 = 20%.
Therefore, your percentage profit on investment is 20%.
Real-World Examples
Let's look at a couple of examples to make sure you understand this calculation
Example 1: Stock Investment
Suppose you invest $2,000 in a stock. After a year, you sell the stock for $2,400. Calculate your profit.
Profit = ($2,400 - $2,000) / $2,000 * 100 = 20%
Your percentage profit on this stock investment is 20%.
Example 2: Real Estate Investment
You purchase a rental property for $150,000. After five years, you sell it for $200,000. Calculate your profit.
Profit = ($200,000 - $150,000) / $150,000 * 100 = 33.33%
Your percentage profit on the real estate investment is approximately 33.33%.
Tips for Accurate Calculations
- Include all costs: Make sure to include all costs associated with the investment, such as brokerage fees, commissions, and taxes.
- Consider the time period: For comparing investments with different durations, use annualized returns.
- Double-check your figures: Ensure that you accurately input all numbers to avoid calculation errors.
Simplify Calculations with Our Percentage Calculator
Manually calculating percentage profit can be time-consuming. Fortunately, our tool makes it easy! Simply enter the purchase price and selling price to calculate your percentage profit instantly. It also handles percentage increase and decrease scenarios beyond just investment!