# How to Calculate Investment Earnings

Share It

Calculating the earnings from your investments can be tricky, based on what you do with those earnings. For example, if you take your capital gains, you’ll have to pay taxes on them. If you reinvest your gains or gift stocks, your overall profit will be different. You might have to factor in fees and commissions based on what you do with your earnings.

Understanding the different ways you can look at investment earnings (also called investment income) will help you decide which of your investments are working best for you.

Read More​: What is an Investment?

## What Are Investment Earnings?

Investment earnings, or investment income, is the gain in value you get from an investment. For example, if you buy a house for ​\$300,000​ and a year later, it’s worth ​\$320,000​, your investment has increased in value by ​\$20,000​. This is where things get tricky.

If you sell your house for ​\$320,000​, by the time you pay interest, commissions, fees and other closing costs, including taxes, you might end up with less than ​\$20,000​ in profit.

On the other hand, if you buy 100 shares of stock at ​\$10​ per share (for a total investment of ​\$1,000​) and your stock goes to ​\$30​ per share, you will probably make a profit if you sell the ​\$3,000​ worth of stock, even after you pay capital gains taxes and commissions. In addition, if your stock paid dividends, you add that to your investment earnings.

If you don’t take your gains as profit (for example, you re-invest your earnings by buying more stock), you have unrealized gains. Another form of investment income is the interest earned on a product like a certificate of deposit.

## What Are Capital Gains?

When you take profits from an investment, you realize a capital gain. If you take your profit within ​one year​ of earning it, the IRS classifies it as a short-term capital gain. If you hold the gain for more than a year, it’s a long-term capital gain. Check with a financial or tax advisor to learn the difference in tax liabilities for short-term and long-term capital gains.

## Calculate Investment Earnings

The simplest way to calculate your investment earnings is to compare your ending value for a certain time period to your beginning value. For example, if you have a portfolio with assets worth ​\$50,000​ on January 1, and your portfolio is worth ​\$58,000​ on December 31, you made ​\$8,000​ in investment income.

However, the numbers are more complicated than that. You will probably want to know what your earnings are if you take them out of your portfolio vs. leaving them in. This will determine how much you’ll pay in fees, commissions and taxes.

You will also want to know what your investment performance is per asset. For example, if one of your stocks went from ​\$1,000​ to ​\$1,400​, you made ​\$400​, or a 40 percent return on that stock. If you have another stock that went from ​\$2,800​ to ​\$3,700​, you made ​\$900​, but only a 32 percent return on your stock. You can use free online capital gains calculators or investment apps to perform certain calculations for you.