Return on Investment. ROI=gain/investment.


You invest $100 in a stock. Its price increases to $120 and you sell it. You have made a gain of $20, and your return on investment is $20/$100=20%.

Note that no time is specified here. That's a problem, as a return on investment of 20% in one year is a lot better than an ROI of 20% over five years. That's why we often convert return on investment to a per-year figure, called an annualized return on investment. See an example of calculating annualized returns.

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