Investments are great. You buy a bunch of assets, sit on them, and enjoy your money growth.
If all goes well, you make money over time; if something doesn’t go as well, you can lose. However, the consensus is that the longer you keep your assets, the lower your chances of losing money are.
This is very encouraging, but also you need to know how your assets perform over time.
The holding period return (HPR) is a measure that helps you do just that, and now you don’t even need spreadsheets.
Our holding period return calculator is a user-friendly tool that simplifies this calculation. It considers the initial purchase price, ending value, and any dividends received during the holding period.
Holding Period Return Definition
The holding period return represents the total return you’ve received on an investment from when you purchased it to when you sold it. This includes any dividends or interest earned, as well as any change in the market value of the investment.
Holding Period Return Calculation Formula
The HPR formula is relatively straightforward. It considers the total return of an investment and expresses it as a percentage. Here’s what you need to calculate the HPR:
- Ending Value of Investment: The value of the investment at the end of the holding period.
- Initial Value of Investment: The initial value of the investment when you first purchased it.
- Dividends: Any dividends or other cash distributions received during the holding period.
The formula to calculate the Holding Period Return is:
HPR (%) = (Ending Value - Initial Value + Dividents) / Initial ValueThe formula to calculate dividend yield is:
Divident yield (%) = Dividents / Initial ValueReal Calculation Example
Imagine you purchased a stock for $1,000 (your Initial value). It’s worth $1,300 at the end of the holding period (your Ending value).
Also, you received $50 in dividends (D). Here’s how you’d calculate the HPR:
- Calculate the difference between the ending and beginning values: $1,300 – $1,000 = $300.
- Add the dividends to this difference: $300 + $50 = $350.
- Divide the total gain by the beginning value: $350 / $1,000 = 0.35.
- Convert this number into a percentage: 0.35 * 100 = 35%.
- (Optional) To calculate dividend yield only: $50 / $1,000 = 0.05 = 0.05 * 100 = 5%
So, the holding period return on your stock investment would be 35% (30% capital gains + 5% dividends).