Table of contents
What are stocks?How is the stock price determined?How to calculate the stock profit?Is stock investment a good idea?When should I sell my stocks?FAQsWhether you're a professional trader or a total newbie in the stock market, this stock calculator will surely come in handy. The purchase stock price and selling price determines the stock return – or, in plain terms, how much money you will earn on your transactions. This stock profit calculator will also provide you with two important parameters: the return on investment (ROI) and the break-even price.
If you're interested in stock investment and trading, make sure to check out the earnings per share calculator, too!
What are stocks?
By definition, stocks are certificates that entitle you to partial ownership of a given company. For example, if a company issues 100 shares of stock outstanding and you buy five shares, you would be entitled to 5% of the company's assets and earnings.
Unlike bonds, stocks make you an "owner" of the company. In the event of bankruptcy, stocks rank below bonds (and other debt instruments), making them riskier financial instruments than bonds, reflected by a higher rate of return.
There are two main types of stocks: common stock, which give you a right to vote at shareholders' meetings, and preferred stock, which typically has no voting rights.
Common stocks are riskier financial instruments than preferred stocks (failing to provide preferred dividend) pay-outs blocks payment of common dividends – see the dividend calculator), so the former typically yield higher returns than the latter.
💡 If you are looking for a more advanced way to trade stock, why not check out our put call parity calculator?
How is the stock price determined?
When a company enters the market, it undergoes valuation during an initial public offering (IPO). After this event, the total value of the company is determined. Dividing this total value by the number of issued stocks gives you the price of a single share.
Once the company is out on the stock market, though, the stock prices fluctuate according to the principles of supply and demand. For example, if the demand skyrockets, the prices will probably increase drastically, too!
How to calculate the stock profit?
The main idea behind this stock return calculator is that you buy stocks when they are cheap and sell them once their value increases. The profit is the difference between the expenses and revenue. You can calculate it according to the following formula:
Profit = [(SP × No) - SC] - [(BP × No) + BC],
where:
SPstands for selling stock price;No– Number of stocks you trade;SC–Selling commission that you have to pay;BP– Buying stock price; andBC–Buying commission.
This stock investment calculator accepts commissions expressed both as fixed monetary values and as a percentage of the price. Once you type in one of these values, our calculator will automatically calculate the other one.
Is stock investment a good idea?
Now that you know your stock profit, you already have an idea of how much sense it makes to invest in stocks. However, there are some indicators that you can calculate to check the profitability of such an investment.
One of these indicators is ROI – return on investment. It tells you what percentage of the initial investment will return to you in the form of profit. You can calculate it with the formula below:
ROI = Profit / [(BP × No) + BC]
ROI is expressed as a percentage. For example, an ROI of 100% means that if you spend a certain sum on stocks, your revenue will be two times higher than that sum.
When should I sell my stocks?
Last but not least, this stock price calculator clearly indicates when you should refrain from selling your stocks. If the price is lower than the break-even price, every selling transaction will only bring you losses. That's why it's essential to sell your stocks only if the price exceeds this value.
To calculate the break-even price, use the equation below:
Break even =[(BP × No) + BC] / [No × (1 - SC%)],
where SC% is the selling commission expressed as a percentage of the selling price.
We also recommend checking our systematic investment plan calculator to explore other investment opportunities.
Finally, you can increase your odds of gaining from the stock market if you check the price trend. One way to do it is by calculating the moving average of the price. Generally, if the price is above its moving average, it will likely continue that trend and produce positive returns.
How much is a good stock return?
The market has returned approximately 10% per year over the last 25 years. Investors consider any annual stock profit above this value to be a good stock return. Besides, some stocks can return a hundred times your initial investment, such as Amazon, Apple, and Nvidia. A single investment in such a company may mean you surpass the market average, ending with significant stock returns.
When to sell stocks/investments?
Some key indicators that it is time to sell your stock:
- When the business's financial strength is diminished;
- When the primary assumption for the company to grow (investing thesis) is no longer valid; and
- When the company faces accounting scandals.
What are stonks?
Stonk is an intentional misspelling of stocks. It is a slang word that tries to make fun of speculative stocks or cryptocurrencies that do not have any fundamental value but still return 100%, 200%, 300%, or even more. The intention is to show how ridiculous stock market pricing can be in the short term.
How do I buy stocks?
Here is how to buy stocks:
Open an investing account with a registered broker.
Put money into your investment account. Depending on your broker, you will have to transfer money or link your bank account.
Choose the company in which you want to invest. Google its name plus the words: ''ticker symbol''. Record the ticker.
Ask your broker to help you buy the company's stocks that have the ticker symbol obtained in the last step.
Enjoy the profits.
