How to Compute the Return on an Investment

The rate of return is one way to measure how well or poorly an investment has performed for you over a specified period of time. You can specify the time period for which you calculate the return on investment. For example, you might want to calculate the return over the life of the investment or just for a particular year. You do not have to have disposed of the investment in order to calculate the return on investment.

Instructions

1. Divide the ending value of your investment by the beginning value. For example, if you made a $4,290 investment in gold and it is now worth $4,500, you would divide $4,500 by $4,290 to get 1.04895.

2. Subtract 1 from the Step 1 result to find the rate of return expressed as a decimal. In this example, you would subtract 1 from 1.04895 to get 0.04895.

3. Change the rate of return from a decimal to a percentage by multiplying it by 100. Completing the example, you would multiply 0.04895 by 100 to get a 4.895 percent rate of return.

References

• Donetsk National Technical University: Return on Investment (ROI): Definition, Equation, Benefits, Limitations
• "Entrepreneur": Return on Investment