Holding Period Return (Yield)

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Holding Period Return (Yield)

Holding Period Return (HPR) measures the total percentage return on an investment over the time it was held. It includes capital appreciation (or depreciation) plus any income (dividends, interest, distributions) received during the holding period. HPR is useful for comparing investments held for different lengths of time once converted to an annualized rate.

Definition and key points

  • HPR = total return over the holding period expressed as a percentage.
  • The holding period begins when the investment is purchased and typically counts from the day after purchase; it ends when the investment is sold.
  • For tax purposes, a holding period of more than one year usually qualifies gains as long-term; one year or less is short-term.
  • HPR can be negative if losses exceed income received.
  • To compare investments held for different lengths of time, convert HPR to an annualized rate.

Formulae

HPR:
HPR = (Income + (End Value − Initial Value)) / Initial Value

Annualized HPR (for n years):
Annualized HPR = (1 + HPR)^(1/n) − 1

For periodic returns (e.g., quarterly), combine returns multiplicatively:
HPR = (1 + r1) × (1 + r2) × … × (1 + rn) − 1

How to calculate (step-by-step)

  1. Identify the initial investment cost.
  2. Determine the end-of-period value (sale price or current market value).
  3. Add all income received during the holding period.
  4. Compute HPR using the formula above.
  5. Multiply by 100 to express as a percentage.
  6. If comparing across different time spans, annualize the HPR.

Examples

  1. Single-year stock with dividend
    Bought at $50, received $5 dividend, now worth $60:
    HPR = (5 + (60 − 50)) / 50 = 0.30 = 30%

  2. Two mutual funds held different lengths:
    Fund X: $100 → $150 plus $5 distribution over 3 years
    HPR_X = (5 + (150 − 100)) / 100 = 0.55 = 55%
    Annualized_HPR_X = (1 + 0.55)^(1/3) − 1 ≈ 15.73%

Fund B: $200 → $320 plus $10 distribution over 4 years
HPR_B = (10 + (320 − 200)) / 200 = 0.65 = 65%
Annualized_HPR_B = (1 + 0.65)^(1/4) − 1 ≈ 13.34%

Although Fund B has a higher raw HPR, Fund X has a higher annualized return and is the better investment over its holding period.

  1. Portfolio with quarterly returns: +8%, −5%, +6%, +4%
    HPR = (1.08) × (0.95) × (1.06) × (1.04) − 1 ≈ 0.131 = 13.1%
    If the benchmark returned 12% over the year, the portfolio outperformed by ~1.1 percentage points (risk adjustments may still be needed).

When HPR is insufficient

  • HPR assumes a single initial investment and a single end value. If there are multiple cash flows (additional contributions or withdrawals) during the period, use a money-weighted return (IRR) or time-weighted return instead.
  • HPR does not adjust for risk, volatility, or differing cash-flow timing — use alongside other metrics when evaluating investments.

Relation to “rate of return”

HPR is essentially the rate of return measured over a specific holding period. Converting to an annualized HPR provides a standardized “rate” to compare investments over different durations.

Bottom line

Holding Period Return gives a straightforward measure of total investment performance over a specified timeframe by combining income and price change relative to the initial investment. For comparisons across periods, convert HPR to an annualized rate. For investments with multiple cash flows or for performance attribution that accounts for timing, use IRR or time-weighted returns.