What Is Holding Period Return (HPR)
Over three years, including dividends, how much did my investment grow in total? The most basic metric that answers this simple question is the holding period return (HPR).
What is holding period return
Holding Period Return (HPR) is the total return over the entire period an asset was held. Regardless of whether the period is 1 month or 10 years, it shows 'how much it became versus the start' in a single number.
The formula is simple. HPR = (ending value + dividends/interest received − starting value) ÷ starting value. For example, if you invested about $7,400 and the valuation is about $9,600 three years later, and you received about $370 in dividends during that time, HPR = ($9,600 + $370 − $7,400) ÷ $7,400 = 35%.
Don't leave out dividends and interest
A common mistake when calculating HPR is looking only at price change and leaving out dividends and interest. You should calculate on a 'total return' basis that includes dividends to get closer to actual performance.
The higher the asset's dividend yield, the larger this difference becomes. Even if the price barely rose, HPR can be positive if you steadily received dividends.
HPR does not by itself reflect the 'length of the period.' Whether 35% is over 3 years or 10 years must be viewed separately.
HPR's limit — you can't compare across periods
HPR's biggest weakness is that it's hard to compare investments over different periods. If A returned 25% over 2 years and B returned 40% over 5 years, which did better? By total return alone B looks larger, but converted to an annual basis, A (about 11.8% per year) is higher than B (about 7.0% per year).
So HPR should be paired with annualization (CAGR). Use HPR to see 'how much it became in total,' and annualization to see 'what percent per year on average.'
Preguntas frecuentes
Q. Are HPR and cumulative return the same thing?
They're used as nearly the same concept. Both mean the total return over the entire holding period. That said, 'cumulative return' carries a bit more of a nuance of chaining multiple periods' returns by multiplication, while 'HPR' carries a bit more of a nuance of measuring a single holding period from start to end at once.
Q. How do I convert HPR to an annual basis?
Use annualized return = (1 + HPR)^(1/years invested) − 1. For example, if HPR is 25% over 2 years, (1.25)^(1/2) − 1 ≈ 11.8% is the annualized return. This is the same concept as CAGR.
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📋 Los resultados se basan en datos históricos; las rentabilidades pasadas no garantizan rentabilidades futuras.
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