Return On Investment (Roi) Definition
There are a lot of different ways to define return on investment (ROI), but at its core, ROI is a way to measure the profitability of an investment. To calculate ROI, you take the money you invested in something and subtract any associated costs. You then divide that number by the total amount of money you invested. The result is expressed as a percentage, which represents how much profit you made on your investment.
For example, let’s say you invested $1,000 in a stock and it went up by 10%. Your return would be $100 ($1,000 x 0.10 = $100). If the stock went down by 10%, your return would be -$100 ($1,000 x 0.10 = -$100).
One thing to keep in mind with ROI is that it’s important to compare apples to apples. In other words, don’t compare the ROI of a stock to the ROI of a bond. They’re two different types of investments with different risks and rewards. It’s also important to remember that past performance is not necessarily indicative of future results. Just because a stock had a high ROI last year doesn’t mean it will have the same ROI this year.
