eHow launches Android app: Get the best of eHow on the go.

How To

How to Calculate a Return on an Investment

Contributor
By eHow Contributing Writer
(93 Ratings)

A Return on Investment (ROI) is calculated to measure the performance of one investment relative to another. ROI is expressed as a percentage and is based on returns over an associated time period, usually one year. For example, a 25 percent annual ROI means that a $100 investment would return $25 in one year. Thus, after one year, the total investment becomes $125.

Difficulty: Easy
Instructions

Things You'll Need:

  1. Step 1

    Write down the amount of your total investment, including fees and expenses, if any. For example, if you bought $950 worth of stock and your fees were $50, then your total investment is $950 + $50, or $1,000.

  2. Step 2

    Write down the amount of profit or loss associated with your investment. If your $1,000 investment in stocks is worth $1,200 one year later, then your profit is $1,200 - $1,000, or $200.

  3. Step 3

    Calculate the ROI by dividing the profit by the total investment: $200/$1000 = 0.20, or a 20 percent annual ROI.

Tips & Warnings
  • ROI can be expressed for different time periods: one year, one month, one week, one day. For example, if a $100 investment returns $150 after one month, then the ROI would be 50 percent monthly ($50 profit divided by $100 investment = 0.50, or 50 percent).
  • Calculators and computer spreadsheet programs can be very useful in calculating ROI. Refer to their instruction manuals for more information.
  • When comparing ROI for different investment opportunities, be sure all fees and expenses have been included to ensure a fair comparison. Some ROI quotes do not include fees and expenses and can therefore be misleading.

Comments  

goodpeople said

Flag This Comment

on 7/18/2009 thanx for the info.

Post a Comment

Post a Comment
  • Writing down my total investment
I Did This

Related Ads

Personal Finance
Mark P Cussen, CFP, CMFC,

Meet Mark P Cussen, CFP, CMFC eHow's Personal Finance Expert.

Get Free Personal Finance Newsletters

Copyright © 1999-2009 eHow, Inc. Use of this web site constitutes acceptance of the eHow Terms of Use and Privacy Policy.   en-US Portions of this page are modifications based on work created and shared by Google and used according to terms described in the Creative Commons 3.0 Attribution License.

eHow Personal Finance
eHow_eHow Business and Finance