ROI (Return on Investment)
A measure of profit relative to the amount invested, expressed as a percentage.
ROI tells you how efficiently an investment generated profit. It is calculated as gain minus cost, divided by cost, expressed as a percentage. ROI is useful for comparing very different opportunities on a level playing field, whether a stock, a rental property, or a business project. Its main limitation is that the basic formula ignores time: a 20% ROI over one year is far better than 20% over five years. For time-sensitive comparisons, investors use annualized return instead. Assetli's analytics show the return on your investments over any period.
Example
You invest $5,000 and later sell for $6,500. Your ROI is ($6,500 minus $5,000) divided by $5,000, which equals 30%.
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Related terms
Compound Interest
Interest earned on both the initial principal and the accumulated interest from previous periods, creating exponential growth over time.
Dividend Yield
The annual dividend payment of a stock or fund expressed as a percentage of its current price.
Net Worth
The total value of all your assets (cash, investments, property) minus all liabilities (loans, mortgages, credit card debt).
Rental Yield
The annual rental income from a property expressed as a percentage of its purchase price or current market value.
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Capital Gains (and Tax)
The profit from selling an asset for more than you paid; it is often subject to capital gains tax.
P/E Ratio
Price-to-earnings ratio, a stock's price divided by its earnings per share, used to gauge how expensive it is.
Real vs Nominal Return
Nominal return is the raw percentage gain; real return is what is left after subtracting inflation.
ETF (Exchange-Traded Fund)
A fund that holds a basket of assets (stocks, bonds, or commodities) and trades on a stock exchange like an individual stock.
Dollar-Cost Averaging (DCA)
An investment strategy of regularly investing a fixed amount regardless of market price, reducing the impact of volatility over time.
FIRE (Financial Independence, Retire Early)
A financial movement focused on aggressive saving and investing (often 50–70% of income) to achieve financial independence and the option to retire decades earlier than traditional retirement age.