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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Return on Investment. How much money you made compared to what you put in.
Why It Matters
ROI is the universal scorecard for any investment. Whether you're comparing stocks, real estate, or starting a business, ROI lets you compare apples to apples. The S&P 500 has averaged about 10% ROI annually since 1926. If someone promises you 50% 'guaranteed' returns, your ROI alarm bells should start ringing.
Key Points
- Calculate it: (Current Value - Initial Cost) ÷ Initial Cost × 100 (invested $1,000, now worth $1,200 = 20% ROI)
- Always compare ROI to alternatives: 8% stock return vs 5% savings account vs 0% under your mattress
- Annualized ROI is fairer for comparison - 50% over 10 years is ~4.1% per year, not that impressive
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Related Terms
Common Questions
Return on Investment. How much money you made compared to what you put in. ROI is the universal scorecard for any investment. Whether you're comparing stocks, real estate, or starting a business, ROI lets you compare apples to apples.
ROI is the universal scorecard for any investment. Whether you're comparing stocks, real estate, or starting a business, ROI lets you compare apples to apples. The S&P 500 has averaged about 10% ROI annually since 1926. If someone promises you 50% 'guaranteed' returns, your ROI alarm bells should start ringing.
Calculate it: (Current Value - Initial Cost) ÷ Initial Cost × 100 (invested $1,000, now worth $1,200 = 20% ROI)
Always compare ROI to alternatives: 8% stock return vs 5% savings account vs 0% under your mattress
Annualized ROI is fairer for comparison - 50% over 10 years is ~4.1% per year, not that impressive