# What Is the Formula for Calculating the Total Return on a Stock?

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When you invest money in stocks, you need to know how to calculate your total return. The total return takes into account all of the costs and all of the proceeds of your investment. Knowing the total return helps you make better evaluations of the performance of your stock purchases and sales.

## Costs and Commissions

When thinking about the cost of investments, most people think of the purchase price of the stock. However, most stock purchases require an additional cost to acquire or dispose of called commissions. The commissions that you pay lower your total return on the stock because it eats into your profits. You can calculate the cost of purchasing a stock by multiplying the stock price by the shares bought. For example, if you purchase 100 shares at \$49 per share, the total cost equals \$4,900.

## Don't Forget Dividends

For growth stocks that pay few dividends, the total return will not be affected if you forget to include dividends. However, many more mature companies pay significant dividends that radically change the total return on the stock. If an investment pays cash dividends, add the amount to the total return. If it pays stock dividends, add the value of the stock when you sell it. For example, if you receive an extra five shares of the stock and you sell them for \$50 each, your total return is increased by \$250 from dividends.