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Glossary Finance

Return on investment (ROI)

Return on investment (ROI) is the gain or loss on an investment as a percentage of what was invested.

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In more detail

The formula is (final value − cost) / cost × 100. Putting in $10,000 and ending with $11,500 is a 15% ROI. ROI ignores time: 15% over one year and over ten years are very different, so compare annualised figures, and remember fees and taxes.

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See also

  • Glossary Internal rate of return (IRR)
    The internal rate of return (IRR) is the yearly discount rate at which the present value of an investment's cash flows adds up to zero.
  • Glossary Net present value (NPV)
    Net present value (NPV) is the sum of an investment's future cash flows, each discounted back to today's money, minus the initial cost.
  • Glossary Inflation
    Inflation is the general rise in prices over time, which reduces what each unit of money can buy.
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