ROI Investment

Return on Investment (ROI) is a financial metric that calculates the return or profit an investment generates in relation to its cost.

ROI Formula:

ROI = (Gain from Investment - Cost of Investment) / Cost of Investment


ROI Calculation Example:

Suppose you invest $1,000 in a stock and sell it for $1,200.
Gain from Investment = $1,200 - $1,000 = $200
ROI = ($200 / $1,000) x 100% = 20%

Types of ROI:

1. Gross ROI: Calculates the return before deducting expenses.
2. Net ROI: Calculates the return after deducting expenses.

Benefits of ROI:

1. Evaluates Investment Performance: ROI helps investors assess the profitability of their investments.
2. Compares Investment Options: ROI enables investors to compare the returns of different investment opportunities. 3. Optimizes Investment Decisions: ROI informs investors' decisions to invest, hold, or divest. Limitations of ROI:

1. Ignores Time Value of Money: ROI does not account for the time value of money, which can lead to inaccurate comparisons. 2. Does Not Consider Risk: ROI does not factor in the level of risk associated with an investment. 3. Can Be Manipulated: ROI can be manipulated by adjusting the investment's cost or gain.

ROI Benchmarks:

1. Spot Market Average: 7-10% Monthly return
2. Future Market Average : 8-12% Monthly return
3. Bonds: 4-6% annual return

ROI Investment Strategies:

1. Diversification: Spread investments across asset classes to minimize risk.
2. Dollar-Cost Averaging: Invest a fixed amount regularly to reduce timing risks.
3. Long-Term Focus: Prioritize long-term growth over short-term gains.

Futures trading involves buying or selling contracts that obligate the buyer and seller to trade an underlying asset at a set price on a specific date.