Question 1

How do I calculate profit on a stock trade?

Accepted Answer

Stock profit = (Sell Price x Shares) - (Buy Price x Shares) - Buy Commission - Sell Commission. For example, buying 100 shares at $50 and selling at $75: (100 x $75) - (100 x $50) = $2,500 profit before commissions.

Question 2

What is annualized return and why does it matter?

Accepted Answer

Annualized return converts your total return into an equivalent annual rate, allowing you to compare investments held for different time periods. A 50% return over 3 years is about 14.5% annualized, while 50% over 6 months is about 125% annualized.

Question 3

How does average cost basis work with multiple lots?

Accepted Answer

When you buy shares at different prices, your average cost basis is the total amount paid divided by total shares owned. For example, buying 50 shares at $40 and 50 shares at $60 gives an average cost basis of $50 per share ($5,000 / 100 shares).

Question 4

Are stock trading commissions still common?

Accepted Answer

Most major brokerages (Fidelity, Schwab, Robinhood, etc.) now offer commission-free stock trading for US equities. However, commissions may still apply for options, international stocks, OTC stocks, or certain specialized brokerages. This calculator includes commission fields for completeness.

Question 5

How are stock profits taxed?

Accepted Answer

Short-term capital gains (held less than 1 year) are taxed as ordinary income. Long-term capital gains (held more than 1 year) are taxed at preferential rates: 0%, 15%, or 20% depending on your income. This calculator shows pre-tax returns.

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