RETURN ON INVESTMENT (ROI)

An investor is someone who commits money, time, or their own effort to get a return on that investment. One way to measure the value of that return is called return on investment, or ROI. Return on investment is a calculation of the amount, or percentage, that you have earned (or lost) on an investment you have made. Returns may be positive or negative. A positive return on investment would mean you earned money, and a negative return would mean you lost money. Return on investment is a percentage of the original amount you invested.
Related to return on investment is risk. Risk is the chance that you will lose money. Different types of investments will give you different returns, and different amount of risk. In general, if you invest in an opportunity with a lot of risk, then you should expect to get a higher return on investment. Low risk investments should give you a lower return on investment. For example, if you place your money in an insured bank account, your money might be pretty safe, but the return may be 1%. If you invest in stocks, you might earn 8%. However, stocks are more risky, and you actually might lose money instead.
The formula is:
ROI =
R - I
x 100

R =
Money received after
making the investment.
I
I =
Original money invested.
Example: John invests $100 in a mutual fund for one year. At the end of the year he has $108. What was his return on investment?
Answer: 108-100 = 8. 8/100 = .08 .08 * 100 = 8%