How Do You Calculate The Average Return On An Investment?
Return on Investment (ROI) is perhaps one of the most commonly used metrics in the world with regard to making buy or sell decisions on an investment. In one simple calculation, the metric can tell you how much you have made or can expect to make on a particular investment. While the genius of the calculation is in its simplicity, the calculation is only as good as the data you input–which is why finding accurate inputs is so important. Average return on investment looks at the average return for at least two periods of time. Determine the cost of the original investment. This is the total cost, including transactions fees or any other cost of acquisition. Determine the return for at least two different points in time, in order to get an average. This means you must determine what the price of the investment is at two points in time. If the asset trades on a national exchange, use the most recent price quote as a proxy for your return measure. If the asset is illiquid, like real estat
