Series 65: Holding Period Returns

Holding Period Returns

Perhaps the simplest type of return is a holding period return. A holding period return measures the return on an investment over the time period that the investment was held. The time period may be less than a year or more than a year. The important fact to remember is that a holding period return is not annualized, so the investor must be careful when comparing holding period returns.

Consider the following two examples.

• • Example: William purchased 300 shares of Regal Robots Corporation at $100 per share. Five years later, he sold the shares at $200 per share. What was William’s holding period return?

The answer is: 100%. Following the formula above we get:

original investment = 30