Question 1

What is ROI?

Accepted Answer

ROI (Return on Investment) measures the gain or loss of an investment relative to its cost. It's calculated as (Net Profit / Cost) × 100%. A positive ROI means profit; a negative ROI means a loss.

Question 2

What is annualized ROI?

Accepted Answer

Annualized ROI scales a multi-year ROI to a yearly rate, so you can fairly compare investments held for different lengths of time. The formula is ((1 + ROI) ^ (1/years) - 1) × 100%.

Question 3

What is a good ROI?

Accepted Answer

It depends on the asset class. Stock market averages 7-10% annually long-term. Real estate averages 8-12% with leverage. Marketing campaigns aim for at least 5:1 ratio (500% ROI). Crypto can be 100%+ in bull markets or -90% in bear.

Question 4

Is ROI the same as profit?

Accepted Answer

No. Profit is an absolute dollar amount (Final value - Initial cost). ROI is a percentage that measures efficiency relative to the cost, so you can compare investments of different sizes fairly.