![]() While past performance does not guarantee future results, a good ROI may be one that beats the stock market in the long term. Over the past four decades, the average annual return of the S&P 500 (an index of 500 companies traded on the stock market) has been close to 7%, after inflation. People often compare a potential investment to putting their money in the broader stock market. But ideally, a desirable ROI should be better than your next best alternative. A ROI of 0% means you got your money back, but nothing more.Īny positive number can be considered a “good” return on investment - It means you got your money back and then some. The worst possible ROI would be a total loss of your investment, which would be -100%. ![]() A negative ROI implies that you did not get all of your initial investment back. On the other hand, no investment can guarantee a return. There is technically no limit to how high ROI can be. That can help you figure out which opportunities to pursue or which assets in your portfolio to sell. ROI puts different investments on a level playing field, allowing you to size them up in a standardized way. ROI shows how much you gained or lost relative to the size of your total investment, almost always presented as a percentage. ![]() The metric has also come in handy to support public policy initiatives, research programs, medical procedures, and more. Companies can use ROI to evaluate the value of introducing a new product line, expanding a factory, opening a new location, buying out a competitor, launching a marketing campaign, or embarking on a new training program. You can use it to determine the value of buying real estate, investing in a company, or even giving money to charity. ROI is a common metric for conveying the profitability of an investment. Looking at profit as a percentage of the money you contributed is your return on your investment. The “plus more” part - what you get above what you put in - is profit. When you invest in something - whether it’s a stock, bond, real estate, small business, or anything else - you’ll eventually want to get that money back, plus more.
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