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Knowing how to calculate investment profit can be important. This is due to the fact that the money you receive from an investment isn’t usually all profit. Learning how to calculate investment profit can help you to determine the amount you’re actually making. Basically, you’ll need to start with the amount of money you invested and add to that the money you paid for expenses related to the investment. By subtracting the money you spent on an investment from its current worth, you can come up with a number that represents your investment profit.
When you make an investment, you're likely to have a range of expenses in relation to it. For example, you may pay sales costs, commissions, and taxes; you may even pay for financial advice. In order to calculate investment profit, you’ll typically need to add up all of your related expenses. Once this is done, you’ll need to add the expenses to the base cost of your investment to obtain the total cost of the investment. Finally, you can subtract the total cost of the investment from its current worth to figure out how much you have profited.
It may help to consider an example when you are learning how to calculate investment profit. For example, if you invested $1,000 US Dollars (USD) in securities and paid $75 USD in fees plus $60 USD for financial advice, the total cost of your investment would be $1,135 USD. If after a period of time your investment is worth $1,500 USD and there are no other expenses related to the investment, you can subtract the total cost of your investment from the amount it is worth today. In this case, you will discover that you have profited $365 USD on your investment. If you had only subtracted the base amount of $1,000 USD from the current worth of the investment, you would not have a realistic view of your profit; instead, it may appear that you earned $500 USD in profit.
You may use this method to calculate investment profit on securities, but it can also work for calculating other types of investments. For example, if you invest in real estate and later sell it, you may need to add a range of expenses, including any money you spent on renovations and commissions, to the purchase price of the property to figure out your total expenses. Then, you can subtract that figure from the price for which you sell the property to determine your profit.
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