How to Calculate Net Gain or Loss

As you review your personal finances, you'll want to determine how different investments you have are performing. This will help you decide whether or not you should put more money into certain stocks, bonds or other investments, pay down debt or use your money for other purposes.

Calculating your net gains or losses for particular investments will require you not only to look at their appreciation, but also their cost to buy, hold, sell and cash in. Reviewing how to calculate gain or loss on stocks or other investments will help you make better financial decisions.

​Consider also:​ How to Measure Stock Performance

A gross amount is the overall amount you realize before you consider things like commissions, fees and taxes. For example, if you buy ​$1,000​ worth of stock at the beginning of the year, and it's worth ​$1,500​ at the end of the year, you've made a gross gain of ​$500​. However, if you cash out the stock, you won't get ​$1,500​. You'll have to subtract any transaction fees, commissions and taxes on the ​$500​. The money you have left over after you subtract those amounts is your net gain, explains the finance company SoFi.

​Consider also:​ Do You Report an Unrealized Gain or Loss on Your Tax Return?

In addition to calculating the overall gross dollar amount of your gains or losses, you'll probably want to determine the percentage gain or loss you had for each investment you hold. This will help you compare their performance against each other, as well as other potential investments you're considering adding to your portfolio.

To calculate your gains or losses in raw numbers, start with your investment value for the time period you're looking at. For example, you might want to see how your stock did last year, so you'll start by looking at its value on January 1. You will subtract that number from your December 31 investment value if your December 31 value is greater. If your year-end value is smaller, subtract that from your January 1 number.

In our example above, your January 1 ​$1,000​ value grew to ​$1,500​ by December 31, so you had a gross gain of ​$500​. This is often too simple a calculation to help you make good investing decisions in certain situations. To get the value of your investment if you were to sell it, you'll need to subtract at your commissions, fees and taxes. That will get you your net gain.

On the other hand, if you're not planning on selling any of your investment and you're planning on re-investing the gain, then you can look at your raw numbers only.

To further complicate matters, you might have received dividend payments. If you received ​$100​ worth of dividends, you might want to add this amount into your ​$500​ in gains if you want to see that added performance of your stock as you evaluate it.

​Consider also:​ How to Calculate the Performance of a Stock That Has Dividends

The math for calculating your net gains in percentage form is pretty simple. Just divide your net gain or loss by your original investment value. In the previous example, let's say that after commissions and fees, your net gain was only ​$450​. Divide ​$450​ by ​$1,000​ to get ​0.45​. You made a ​45 percent net gain​.

That's a pretty hefty percentage gain. Many people are happy with high single-digit gains each year. Here's where knowing percentages can come in handy. If you're a small, casual investor making ​8 percent​ in the market each year, but you have significant credit card debt at a ​20 percent APR​, you might want to use your money to pay down your debt. Knowing your investment return, in percentages, will help you compare these numbers.

Here's where things get even trickier – your taxes can turn your net gain into a net loss. Even if, after taxes, commissions and fees, you realize a gain from an investment, if you're bumped into a higher tax bracket, your gain could be wiped out. This is why many people re-invest their gains annually instead of taking them as income – to avoid paying taxes for a particular year.

Cashing in investments could also raise your income enough that you no longer qualify for certain tax credits, which could cost you thousands of dollars. Review the IRS classifications of long-term and short-term gains to see how these affect your taxes.