How Do You Calculate A Return On An Investment?
A Return on Investment (ROI) is calculated to measure the performance of one investment relative to another. ROI is expressed as a percentage and is based on returns over an associated time period, usually one year. For example, a 25 percent annual ROI means that a $100 investment would return $25 in one year. Thus, after one year, the total investment becomes $125. Write down the amount of your total investment, including fees and expenses, if any. For example, if you bought $950 worth of stock and your fees were $50, then your total investment is $950 + $50, or $1,000. Write down the amount of profit or loss associated with your investment. If your $1,000 investment in stocks is worth $1,200 one year later, then your profit is $1,200 – $1,000, or $200. Calculate the ROI by dividing the profit by the total investment: $200/$1000 = 0.20, or a 20 percent annual ROI.
