Knowing how to calculate the performance of your investments is critical to determining which investments you should keep and which you should replace. Missing out on factors that you should include, or using the wrong formula, can give you a false impression -- for better or for worse -- about how well your investments are doing.

## Factors in Investment Performance

The obvious factors that you need to know when calculating your investment performance is the amount you invested, the amount you sold your investment for or the current value, and how long you kept the investment. However, you also need to account for dividends paid by the investment while you owned it. Failing to do so can cause you to overlook stocks with low growth but high dividend yields. When calculating your gain or loss, you need to also subtract any broker fees that you pay.

## Raw Gain or Loss

The raw gain or loss on your investment equals the amount you received for the investment when you sold it, or its current market value if you still own it, plus any dividends received, minus the amount you paid for it and the broker fees. For example, if you paid $12,200 for the stock, received $500 in dividends, sold it for $12,800 and paid $100 in broker fees, your gain would be $1,000. This measure benefits you because it tells you how much your bottom line has changed. For example, a $1,000 gain means you have $1,000 more money in your account. However, this formula is limited because it does not take into account how long you had to invest the money to realize the gain nor does it account for the amount of money that you had tied up in the investment.

## Percentage Gain or Loss

From your raw gain or loss, you can calculate the percentage gain or loss of any investment. To do so, divide the gain or loss by the amount you invested and multiply the result by 100. For example, if you had a $1,000 gain on a $12,200 investment, divide $1,00 by $12,200 to get 0.082 and multiply by 100 to find you have an 8.2 percent gain. The advantaged to using percentages is the formula takes into account the amount that you had to invest to realize your gain. However, the total percentage gain or loss does not account for the time you held the stock.

## Percentage Gain or Loss Per Year

From your total percentage gain, you can calculate your average annual gain or loss. To do so, divide 1 by the years you held the investment. Next, divide the total percentage gain by 100 and add 1. Finally, raise the gain as a decimal to the power of 1 over the number of years. For example, if you had an 8.2 percent gain over two years, divide 1 by 2 to get 0.5. Then, divide 8.2 by 100 to get 0.082 and add 1 to get 1.082. Finally, raise 1.082 to the 0.5th power to get 1.0402, meaning you had an average gain of 4.02 percent each year. This formula takes into account the total gain, the amount invested and the time you held the investment, giving you the most complete picture of your investment performance.

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