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Well, I’ve confused myself yet again. It doesn’t take much…haha.

This year’s market is now closed, so I’m seeing how I did this year and am already setting up my Excel spreadsheet for 2016.

My 2015 returns will probably dictate how much I have to drink to night – the difference is a lot v. a heck of a lot (no worries, I am not driving and will not have to get my stomach pumped).

Hopefully, someone can explain the proper way to calculate a stock’s return for a given year, as well as its lifetime return, over multiple years, using the cost-basis.

I’ll provide an example, along with numbers, to illustrate my questions.

We will start with the 2015 analysis, which I think is pretty simple(or maybe I am wrong and messing it up?).

On 1/4/15, I purchased 10 shares of XYZ corp. It was trading for \$50.00 a share. It pays a dividend.

My broker charges \$6.95 a trade. I get free dividend re-investments, but they do increase my cost-basis.

So, my initial investment on 1/4/15 is worth \$500.00, and my initial cost-basis is \$506.95.

As a result of re-investing its dividends and share appreciation, on 12/31/15, my position in XYZ corp. is worth \$550.00.

As a result of re-investing dividends my cost-basis increased from \$506.95 to \$515.00.

The 2015 return for this position and the position’s lifetime return is the same, because there is just one year.

To calculate the yearly/lifetime return, I used the following formula:

\$550.00 (position’s 12/31/15 value) - \$515.00 (12/31/15 cost-basis) / \$515.00 X 100 = 6.80% return

• Is this analysis correct???

Now, here is where I am getting confused.

Let’s pretend it is a year from now (Dec. 2016) and the Cubs still haven’t won the series in over 100 years.

So, it is now 12/31/16, and I want to calculate two things:

(1) I want to calculate XYZ Corp’s return for JUST 2016; &

(2) XYZ Corp’s return for my lifetime holding it (1/4/15 through 12/31/16).

Here is the applicable information.

1/4/15 position value: \$500.00
1/4/15 cost basis: \$506.95

1/4/16 position value: \$550.00
1/4/16 cost-basis: \$515.00

12/31/16 position value: \$540.00
12/31/16 cost basis: \$520.00

As you can see, the total position value decreased in 2016, but is still up for its lifetime. The cost-basis increased again, because the dividends paid were also re-invested.

Again, utilizing the cost-basis(es), please help me calculate and include the formula(s) for:

(1) XYZ’s return JUST for 2016; and

(2) XYZ’s lifetime return in my portfolio.

I appreciate the assistance. I’m sure this is simple and I’m just overlooking something. Have a Happy and prosperous New Year!

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