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Return on investment (ROI)

Return on investment (ROI)

The ratio of the benefit or return of an investment to the cost of the investment, typically expressed as a percentage.

Alice bought a share of stock for 100 USD, received 10 USD in dividends, and sold it for 120 USD. Alice earned a 0.3 or 30% ROI (120+10-100)/100. This is independent of how long she held the stock, so it is generally not the same thing as her annual return. If she held the stock for two years her average annual return was about half the ROI. Recently, some have included other benefits in ROI, like positive environmental or social impacts.

Related Links

Investopedia's article on ROI

Wikipedia's article on ROI