Holding Period Return Calculator

Beginning value of investment ($):

Ending value of investment ($):

Income received from investment ($):

Calculate HPR

 

About Holding Period Return Calculator (Formula)

The Holding Period Return (HPR) Calculator helps investors evaluate the total return of an investment over a specific holding period. This metric is essential for comparing the profitability of investments, whether they are held for a short-term or long-term period. HPR takes into account both income and capital gains, offering a clear view of investment performance.

Formula

The formula for calculating Holding Period Return (HPR) is:

HPR = (Income + Ending Value – Beginning Value) / Beginning Value

Where:

• Income refers to any dividends, interest, or cash inflows received during the holding period.
• Ending Value is the value of the investment at the end of the holding period.
• Beginning Value is the initial value of the investment when the holding period began.

How to Use

To use the Holding Period Return Calculator:

1. Identify the initial value of the investment (Beginning Value).
2. Add any income (such as dividends or interest) received during the holding period.
3. Find the value of the investment at the end of the period (Ending Value).
4. Subtract the Beginning Value from the sum of Income and Ending Value, and divide by the Beginning Value.
5. The result will give you the holding period return as a decimal or percentage.

Example

Let’s say you purchased an investment for $1,000, received $50 in dividends, and at the end of the holding period, the value of the investment grew to $1,200. The HPR would be calculated as:

HPR = (50 + 1,200 – 1,000) / 1,000 = 250 / 1,000 = 0.25 or 25%

This means the investment generated a 25% return during the holding period.

FAQs

1. What is Holding Period Return (HPR)?
   Holding Period Return measures the total return of an investment over the time it was held, including both income and capital gains.
2. What is the formula for HPR?
   The formula is HPR = (Income + Ending Value – Beginning Value) / Beginning Value.
3. What does a positive HPR indicate?
   A positive HPR indicates that the investment has appreciated in value and/or generated income over the holding period.
4. What does a negative HPR mean?
   A negative HPR suggests that the investment has lost value or did not generate enough income to offset losses.
5. How does HPR differ from annualized return?
   HPR measures the return over the entire holding period, whereas annualized return normalizes the return to reflect a yearly rate.
6. Can I calculate HPR for different types of investments?
   Yes, HPR can be used for stocks, bonds, real estate, and any other type of investment where income and value changes are present.
7. What is considered a good HPR?
   A good HPR depends on market conditions, investment goals, and time horizons, but a positive return that exceeds inflation and alternative investments is typically favorable.
8. Does HPR account for inflation?
   No, HPR does not account for inflation. It only measures the nominal return. To adjust for inflation, you would calculate the real return.
9. How can HPR be used for investment comparison?
   By calculating the HPR for multiple investments, you can compare their performance over the same or different periods to make better investment decisions.
10. What is the difference between HPR and capital gains?
    HPR includes both income (like dividends or interest) and capital gains, whereas capital gains only reflect the change in the investment’s price.
11. How does the holding period affect HPR?
    A longer holding period can increase the likelihood of capturing dividends or interest, which can positively affect HPR. However, it can also expose the investment to more risk.
12. Is HPR used in professional financial analysis?
    Yes, HPR is a commonly used metric for evaluating the performance of investments over specific periods.
13. Can I use the HPR formula for short-term investments?
    Yes, HPR works for both short-term and long-term investments. Just make sure to use the correct time frame and income data.
14. What if no income is generated during the holding period?
    If no income is received during the holding period, simply exclude the income from the formula. The formula becomes HPR = (Ending Value – Beginning Value) / Beginning Value.
15. Does HPR account for taxes?
    No, the HPR formula does not factor in taxes. Taxes on income or capital gains would reduce the net return.
16. Can HPR be negative even with income?
    Yes, if the investment’s value decreases significantly, the HPR could still be negative even if some income is generated.
17. How do reinvested dividends affect HPR?
    Reinvested dividends are considered part of the income and should be included in the HPR calculation to reflect the true return on investment.
18. What if the investment is sold before the holding period ends?
    The ending value in the HPR formula would be the sale price of the investment.
19. Is HPR useful for bonds?
    Yes, HPR is useful for bonds, as it accounts for both interest income and changes in bond value.
20. Can HPR be used for foreign investments?
    Yes, but you may need to adjust for currency fluctuations if the investment is in a foreign currency.

Conclusion

The Holding Period Return Calculator is a valuable tool for assessing the total return on an investment over a specific period. By using the formula (Income + Ending Value – Beginning Value) / Beginning Value, investors can easily calculate their return and compare the performance of different investments. Understanding HPR helps in making informed financial decisions and optimizing investment strategies.