ROI, or Return on Investment, is a measure of the profit or loss you make on a stock investment relative to the initial amount invested. Here's how to calculate ROI on stock investment:
Determine the initial investment: Calculate the total amount you invested in the stock, including any brokerage fees or other transaction costs.
Determine the final value: Calculate the current value of your stock investment, including any dividends or other returns received.
Calculate the profit or loss: Subtract the initial investment from the final value to calculate the profit or loss on the investment.
Calculate the ROI: Divide the profit or loss by the initial investment and multiply by 100 to get the ROI as a percentage.
Here's the formula for calculating ROI:
ROI = (Final Value - Initial Investment) / Initial Investment x 100
For example, let's say you invested $10,000 in a stock, and after a year, the stock is worth $12,000. You also received $500 in dividends during the year. To calculate the ROI, you would follow these steps:
Initial Investment = $10,000
Final Value = $12,000 + $500 = $12,500
Profit = $12,500 - $10,000 = $2,500
ROI = ($2,500 / $10,000) x 100 = 25%
In this example, the ROI on the stock investment is 25%, indicating a profitable return on the initial investment. Keep in mind that ROI is just one measure of investment performance and should be considered along with other factors, such as risk, volatility, and long-term goals.
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