Return on Investment (ROI)

What is Return on Investment?

The gain or loss on an investment relative to its cost.

Understanding Return on Investment

ROI expresses profit as a percentage of what was invested. It is simple and works for almost any investment.

Plain ROI ignores time. To compare investments held for different periods, use an annualized return.

Formula

\text{ROI} = \frac{\text{Final value} - \text{Cost}}{\text{Cost}} \times 100

Example

Invest $1,000 and sell for $1,250: ROI is 25%.