Before we discuss how to use a stock calculator to analyse your return on investment, let's briefly discuss what stock and stock return are.

Stocks, also known as shares, are a portion of the ownership of a company. When you buy a stock, you become a part owner of the company and depending upon its type, you may or may not get a voting right in the company.

Stocks are basically of two types, i.e. preferential stock and common stock. Even though both these stocks give you a percentage of the company’s ownership, the rights that come along with these shares are what sets them apart.

When a company declares dividends on its shares, the preferential stock owners get the first right. This means common stock owners only get a share in the dividend if there is anything left to distribute after setting aside the dividend amount for preferential shareholders.

Another difference is the right to vote in the affairs of the company. When it comes to the level of risk, common stock owners bear a higher level of risk than preferential owners. Hence in the case of voting rights, preferential stock owners only get it in matters that can be detrimental or beneficial to their interest. Whereas common stock owners get a voting right in every matter of the company that requires approval from the shareholders unless anything contrary was specifically mentioned while issuing the shares.

What is a Stock Return Calculator?

Stock return is the difference in the price you buy and sell the shares. People often seek the help of a share calculator to make their trading and investment decisions. It is a calculator available online that helps you calculate and keep track of your investments and their returns.

With the use of this calculator, you can find stocks that are more profitable as compared to others. It also helps you in determining if a stock is over or undervalued.

How Does Stock Return Calculator Work?

A stock return calculator is very simple to use as it doesn’t require a lot of input to give you an answer. You just need to feed in the following information:

Buying price: This is the price at which you want to purchase the shares.
Position size: The total amount you want to invest or you can also enter the total number of shares you want to buy.
Buying commission: This is the commission your broker charges to facilitate the transaction. It could either be a percentage of the transaction value or a flat fee commission.
Stop loss: If the trade doesn’t go as per your plan, you can add a stop-loss price to determine how much you may lose.
Target price: This is the price at which you want to sell the stock to generate returns on your investment.
Selling commission: Most brokers levy a brokerage at times of both buying and selling the stocks. If your broker also levies this commission, you can add it to the calculator.

Once you add the following information to your share market calculator will give you all information on your possible returns from a particular stock. We have discussed the formula in further detail.

Formula to Calculate the return on investment

The formula to calculate the return on investment using a stock market calculator is as follows:
Return on Investment = [(SP * NS) - SC] - [(BP * NS) - BC]
Here,

SP - Selling price of the stock.
NS - Number of shares you want to sell.
SC - Selling commission on the sale (if applicable).
BP - Buying price per share.
NS - Number of shares you bought.
BC - Buying commission on the purchase of shares (if applicable).

Let’s understand it better with an example:
Suppose an investor bought 100 shares of Company X, for ₹125 each with a buying commission of 2% on the sales price. After 6 months, he aims to sell the shares at ₹170, with an applicable selling commission of 2%.

His return on investment shall be:
ROI = [(170*100) - 2% of 1,70,000] - [(125*100) - 2* of 1,25,000]
= [170000 - 3,400] - [1,25,000 - 2500]
= 1,66,600 - 1,22,500
= 44,100

In this case, the stock market returns calculator has given a return of ₹44,100 on purchasing and selling this particular stock.

Advantages of Using Stock Return Calculator

There are various advantages of using a stock calculator. Some of them are:

• It helps you in determining the returns on your investments.
• It helps you find your net profits after you have paid the commission to your broker. Therefore, you can find out your net return for every trade, or in other word, how much money you have gained or lost.
• It helps you determine the future value of your investments
• Using a stock calculator, you can determine the ideal stop loss for your investments

How to Use a Stock Return Calculator?

It is fairly easy to use a stock calculator. By following these simple steps, you can calculate the returns on your investments in just a few minutes.

Step 1: First of all, start by entering the total number of shares you bought.

Step 2: Now, enter the purchase price and selling price.

Step 3: Add any commission that you paid in order to buy or sell the shares.

Step 4: If you have triggered the capital gain tax on your investments, make sure to add that as well.

Step 5: Finally, hit the ‘calculate’ button to see your net return on investments.

Conclusion

Using a stock return calculator is not only very helpful but also quite convenient. Various investors take help from it to plan their investment strategies and calculate their approximate returns. While it is impossible to figure out the exact returns on your stock investments due to the volatility of the market, you can use it to analyse different market scenarios and plan your next move accordingly.

It can prove to be an important tool for investors in helping them make informed decisions.