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Whether you invest in individual stocks, mutual funds or real estate, you want to know how well your investments are performing. The holding period return on an investment measures how well it did while you owned it. The holding period return can be measured in raw dollars or as a percentage of your original investment. To figure the holding period return rate, you need to know the purchase price, current price or sale price, and how much you received in distributions while you owned it.
Subtract the purchase price from the selling price or, if you still own the investment, the current price, to figure your gain or loss on the investment. For example, if you invested $8,000 in a mutual fund and it’s now worth $11,000, you have a $3,000 gain during the holding period.
Add any payouts received from the investment during the holding period, such as dividends, to the gain or loss. Continuing the example, if the mutual fund made $500 in distributions while you owned it, add $500 to $3,000 to get a total gain of $3,500 during the holding period.
Divide the total gain by the initial investment to figure the holding period return rate. In this example, divide $3,500 by $11,000 to find the holding period return rate is 0.318.
Multiply the holding period return rate expressed as a decimal by 100 to figure the holding period return rate as a percentage. Finishing the example, multiply 0.318 by 100 to find the mutual fund’s holding period return rate equals 31.8 percent.
- The holding period return on investment does not account for how long you held the investment, so you need to see how long the investment was held to gauge how well the investment actually performed. For example, a 15 percent rate of return might sound great until you realize the stock was held for 10 years. Alternatively, a 5 percent return might not sound as attractive until you find out the stock was held for just three months.
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