How to Calculate the Holding Period Return

by Angie Mohr; Updated September 26, 2017
Hand drawing ROI (return on investment)

The Holding Period Return is an investment measure that calculates the return you have received on your investment over the length of time that you have held the investment. It is a simple calculation that can be used to compare your rate of return against a target rate of return or to compare different investment opportunities to see which one produces the highest return. Annualizing the HPR allows you to compare investments with different holding periods to each other.

Items you will need

  • Calculator
  • Pencil
  • Paper
  • Alternatively: Microsoft Excel spreadsheet

Calculating the HPR

Step 1

Gather together the investment statements of the investments for which you want to calculate the HPR. The information you will need is the initial value of the investment when you purchased it, the income you have received in the length of time you have held the investment including interest, dividends and capital gains and the ending value of the investment if it is different than the initial value.

Step 2

The HPR is calculated as follows: [Income + (ending value - beginning value)]/beginning value Let's look at an example. A stock that you have been holding in your portfolio for six months has paid dividends of $47 and is currently worth $693. You purchased the stock six months ago for $550. The HPR would be: [$47 + ($693 - $550)]/$550 or 34.5% You have had a 34.5% return on your investment over the length of time you have held it.

Step 3

If you want to calculate the HPR on a discount bond, you would simply take the difference between what you purchased the bond for and its current value. For example, if you purchased a bond last month at $943 and its face value is now $958, your holding period return would be: ($958 - $943)/$943 or 1.6%

Annualizing Your HPR

Step 1

The limitation of the HPR calculation is that it doesn't take into account how long you have held the investment. In the examples above, it doesn't really tell you anything to know that you have made 34.5% or 1.6% because the investments have been held for different time periods. Making 1.6% in a month is much different than making 1.6% in a year. Annualizing the HPR allows you to compare "apples to apples" so that you know how much each investment will make in one year based on your current rates of return.

Step 2

To annualize your HPR using simple interest, multiply it by 12 divided by the number of months you have held the investment. For example, in our first stock example, the annualized return would be 34.5% X 12/6 or 69%. In the second bond example, the annualized return would be 1.6% X 12/1 or 19.2%.

Step 3

Now you can compare returns on different investments. The stock investment in the example above earns 69% return annually while our bond investment earns 19.2%.

About the Author

Angie Mohr is a syndicated finance columnist who has been writing professionally since 1987. She is the author of the bestselling "Numbers 101 for Small Business" books and "Piggy Banks to Paychecks: Helping Kids Understand the Value of a Dollar." She is a chartered accountant, certified management accountant and certified public accountant with a Bachelor of Arts in economics from Wilfrid Laurier University.

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