Return on Investment
a.k.a. ROI
How much you gained or lost compared with what you put in, usually shown as a percentage.
Return on investment (ROI) answers one question: for every dollar I put in, how much did I get back? The formula is (what you ended with − what you put in) ÷ what you put in, times 100 for a percentage.
It's simple, which is the point, but it hides things. ROI ignores time: 50% over ten years is not 50% over ten weeks. It also ignores risk: two trades with the same ROI can have had very different chances of blowing up along the way. And remember to count the fees.
Working out ROI
- You buy $400 of a coin and pay $4 in fees: total in = $404.
- You later sell for $500 and pay $5 in fees: total out = $495.
- ROI = (495 − 404) ÷ 404 × 100 ≈ 22.5%.
Bottom line: Leave out the fees and you'd think it was 25%. They matter.
Keep this word for good
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