InvestingAll terms starting with R
ROI (Return on Investment)
Also called: return on investment
Total return relative to what was invested, usually including cash flow, principal paydown, and appreciation.
ROI is deliberately broad, which makes it useful for a full picture and easy to misuse in comparisons. A cash-flow-only ROI and one including appreciation are not the same measurement.
Whenever ROI is quoted, the useful question is what is in the numerator and over what period.
Put a number on it
This term feeds the calculators below.
Related terms
- Cash-on-cash returnAnnual pre-tax cash flow divided by the cash you actually invested, measuring return on money out of pocket.
- CAGR (Compound Annual Growth Rate)The smoothed annual rate at which a value would have grown to reach its ending amount over a period.
- AppreciationAn increase in a property’s value over time, from market movement or from improvements made to it.
- EquityThe difference between what a property is worth and what is owed against it.
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