Calculate Return on Investment percentage
ROI (Return on Investment) measures investment profitability as a percentage. Formula: ROI = (Gain - Cost) / Cost × 100. If you invest ₹10,000 and receive ₹12,000, ROI = (12000-10000)/10000 × 100 = 20%. It helps compare different investments.
Good ROI varies by investment type: Stocks historically 10-15% annually, real estate 8-12%, FDs 5-7%, gold 8-10%. Consider risk—higher returns usually mean higher risk. Compare ROI against inflation and alternative investment options available.
ROI shows total return without time consideration. CAGR (Compound Annual Growth Rate) shows annualized return, accounting for compounding. 100% total ROI over 5 years equals ~15% CAGR. CAGR better compares investments of different durations.
Basic ROI doesn't account for inflation. Real ROI = Nominal ROI - Inflation rate. A 12% ROI with 6% inflation means 6% real ROI. Always calculate real ROI for long-term investments to understand true purchasing power gains.
ROI doesn't consider: time (100% in 2 years vs 5 years), risk level, cash flow timing, or opportunity costs. It can be manipulated by excluding certain costs. Use ROI alongside other metrics like payback period, NPV, and IRR for complete analysis.
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