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A stock index can give you a good idea of how the overall stock market, or a certain portion of the stock market is performing. The Dow Jones Industrial Average is perhaps the best-known index, but isn't widely considered to be a great snapshot of the entire market, as it consists of only 30 companies.

There are also indices for individual sectors, such as technology, healthcare, and finance, which can help track the performance of certain types of companies. Indices can also be useful for measuring the performance of your own portfolio against a benchmark. Calculating the return of stock indices To calculate the return of a stock index between any two points in time, follow these steps:. First, find the price level of the chosen index on the first and last trading days of the period you're evaluating.

Be sure to use the opening price on the first day and the closing price on the last in order to make sure your calculation is as accurate as possible.

Next, subtract the starting price from the ending price to determine the index's change during the time period. Finally, divide the index's change by the starting price, and multiply by to express the index's return as a percentage.

This formula is useful for determining the return of individual investments as well. First, using an accurate price chart, determine the starting and ending price.

Total Stock Return - Formula and Calculator

A positive percentage indicates that the index increased during the time period, while a negative percentage indicates that the index fell. If you think you're ready to jump into the stock market, check out our Broker Center here. Try any of our Foolish newsletter services free for 30 days.

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How to Calculate Return on Indices in a Stock Market Knowing how an index is performing can give you an idea of how the market is doing and how your portfolio is doing relative to the index. Calculating the return of stock indices To calculate the return of a stock index between any two points in time, follow these steps: This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors.

We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better!

How-To Calculate Expected Total Return for Any Stock - Sure Dividend Sure Dividend

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