Return on Investment (ROI)
- Return on investment (ROI) is a simple measure of how much an investment has gained or lost, expressed as a percentage of the amount originally put in.
- ROI is calculated as the current value minus the original cost, divided by the original cost, with a positive figure meaning profit and a negative one meaning a loss.
- It is quick and easy to compare across assets but ignores how long the investment was held and how much risk was taken.
Return on investment (ROI) is a simple measure of how much an investment has gained or lost, expressed as a percentage of the amount originally put in.
How it works
ROI is calculated by taking the current value minus the original cost, divided by the original cost. A positive ROI means a profit and a negative one means a loss. It is straightforward but does not account for how long the investment was held or the risk taken, so two investments with the same ROI can be very different.
Why it matters
ROI is a quick, common way to compare outcomes across different assets or strategies. In volatile markets like crypto it should be read alongside the time period and risk involved, since a high ROI achieved with extreme risk is not the same as a steady one.
Example
Buying an asset for 100 and selling it for 150 is a 50% ROI.
How is ROI calculated?
What are the limits of using ROI?
Should I judge a crypto investment by ROI alone?
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