6 financial formulas to help you succeed

Formula No. 5: Calculate your gains (or losses)
(Market price – Purchase price) ÷ Purchase price = Percentage increase

You're invested in a blue-chip stock, and you'd like to know how much, in percentage terms, your investment has increased so that you can finally get your brother-in-law to quit yapping about the killer returns he's going to realize on his ill-advised investment in desert-front property in Arizona.

Using the formula, say you bought the blue-chip stock at $60, and now it's trading for $100:

($100 - $60) ÷ $60 = 67 percent gain

You can prove that you're one smart cookie.

If, on the other hand, you listened to your brother-in-law's sales spiel about the property in Arizona, your investment has gone down in value. By how much? You just switch up the formula a little:

(Purchase price – Market price) ÷ Purchase price = Percentage decrease

Suppose you bought shares in an Arizona-focused real estate investment trust at $200 and it's now selling for $100:

($200 - $100) ÷ $200 = 50 percent loss

Sorry about your loss!


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