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# How to calculate stock profit?

#### TLDR

• Stock profit is the calculation of how much profit you make when you sell a stock.
• When investing in stocks, you can make profits in two ways. The first type of earning is from capital appreciation and the second type of earning is from dividends.
• The point of calculating stock profit is to determine the cumulative return on investment. The formula to calculate stock profit is used to measure your overall return on investment regardless of the period over which you held a particular stock(s).
• When calculating stock profit, it is better to factor in all return elements to get the total return calculation. These elements will include dividends received (or interest in the case of bonds) and any fees associated with the investment such as trading fees or broker commissions.
• Spreadsheet tools like MS Excel and Google Sheets are known for being very helpful in making complex financial calculations and include many helpful tools in this regard. There is a simple way to create a spreadsheet for calculating the stock profit and a more advanced method. It’s advisable to get a grasp on both.
• The process of selling stocks to lock in the profit that they made due to a rise in prices. The prices when you bought those stocks for the first time are known as profit-taking. While profit-taking is a term that can be applied to a broad range of securities (e.g., stocks, bonds, mutual funds, etc.), it is primarily used in the context of stocks and equity indices.
• A stock profit-taking strategy is a plan of action wherein you know exactly when to sell your stock to gain an optimal amount of profit.
• One strategy to make a profit in stocks is to sell as soon as your potential gain reaches the range of 20-25%. Another profit-taking strategy is the 2% rule. This rule cautions you against risking more than 2% of whatever is available in your trading account on any given trade. Yet another profit-taking strategy is to sell half your shares when your share prices double your risk and sell the rest when the prices fluctuate to enable you to get to a profit target that you are aiming for.

#### How to Calculate Stock Profit

##### The following are the steps required to mathematically calculate Stock Profit
• First, calculate the costs of all the shares.

##### Costs = (Number of Shares x Share Purchase Price) + Commissions
• Next, calculate the total resale value of the stocks, called “proceeds.”

##### Proceeds = (Number of Shares x Share Sell Price) + Dividends Received - Commissions
• Calculating Stock Profit now becomes straightforward. Just subtract costs from proceeds.

##### Profits = Proceeds - Costs
• To calculate cumulative returns, use the following formula:

##### Cumulative Return = (Profit/Costs) x 100%
• To calculate annual returns, use the following formula:

#### Simple stock profit calculation using a spreadsheet

##### Figuring out your stock profit using MS Excel or Google Sheets is very simple and simplifies the calculation significantly. The process is similar to a manual approach. You need to define the necessary fields first. These fields will be:

• The number of shares
• Sell price
• Commissions paid