ROI
0%
Profit/Loss
$0
Annualized ROI
0%
Investment Summary
Understanding ROI (Return on Investment)
ROI, or Return on Investment, is one of the most important metrics in finance. It measures the profitability of an investment relative to its cost, helping you compare different investment opportunities and make informed decisions.
The ROI Formula
ROI = ((Final Value - Initial Investment) / Initial Investment) × 100
Why ROI Matters
- Compare investments: Evaluate which opportunities offer the best returns
- Track performance: Monitor how your investments perform over time
- Make decisions: Use data to guide your investment strategy
- Benchmark: Compare returns against market averages or other investments
Annualized ROI
When comparing investments held for different time periods, annualized ROI provides a standardized measure. This allows you to fairly compare a 2-year investment against a 5-year investment by showing what the annual return would be.
💡 Tip: A "good" ROI depends on the investment type. Stocks historically average 7-10% annually, while real estate might target 8-15%. Always compare against benchmarks in your investment category.
ROI vs Other Metrics
While ROI is useful, consider other metrics for a complete picture:
- Compound Annual Growth Rate (CAGR): Smoother representation of annual returns
- Internal Rate of Return (IRR): Accounts for cash flow timing
- Net Present Value (NPV): Considers time value of money