Have you ever realized that a true definition of returns on your investments is how much money you’re actually making? Well, you’re in luck! These will be some useful tips! Today, we are going to take a deep look into the world of Return on Investment or ROI to anyone as the basis when making investment decisions. It does not matter whether you are a professional expert or even a newcomer to the field; ROI calculator is a very critical aspect that you must consider to make the right choices about your portfolio. We’ll not only demonstrate the ROI idea, but also you will have the chance to join our user-friendly ROI calculator to find out the possible result. But, it is this compact, number crunching machine that helps you get a real snapshot of any Investment, giving you the necessary returns math.
We are also aware that investors have different purposes and plans, which is why we will do our best to categorize you accordingly. Our aim is to provide the best planning software (a suite of investment calculator) that will facilitate a continuous monitoring of your finances. Apply for SIP calculator to discover the value of rupee – cum – average method, or mutual fund calculator to give you a feeling how much potential your fund investment could have. Fixed deposit investment is always short term and hence knowing return on investment will help investors to make informed decisions effectively and quickly. Upon using FD calculator, you will be able to predict your weekly, monthly or even future income using the given interest rate and timeframe.
Incorporating ROI calculator with variety of other tools into your investing arsenal helps you to advance your skills and become a smart, knowledgeable and proactive investor, in pursuit of your investment objectives!
What is ROI?
The ROI is a financial measure of profitability that quantifies the earnings of a given investment. In its essence you will find out the amount of money (or the amount of the money you spent, if you lost money) you’ve got in comparison with the opening financial investment value. ROI has a straightforward expression of a percentage, helping to choose the best investments among different options. There are different options where you don’t have all the numbers in your grasp. Exactly there the ROI calculator for investment play their role.
Investment calculators, such like the ROI calculators, can be an invaluable tool for reducing the level of ambiguity when assessing investments. These simple spreadsheets can aid you quickly with your ROI obtaining various calculations ROI formula such as a basic ROI calculator with one that considers making of dividends or interest. The complexity in the types of investment gets even bigger as we have the specialized ROI calculator for different investment types – SIP calculators that are for the system types of investment plans, mutual fund calculator, fixed deposits calculators, and a ROI calculator for both lump sum and investment return scenarios. Through the use of these different calculators while having a basic ROI formula down, it will be easier to understand what investing is all about and to take the bull by the horns in terms of your financial future.
How to Calculate ROI
There are two main formulas for ROI calculator:
- Basic ROI:
ROI = (Net Return on Investment / Investment Cost) * 100 %.
- Alternative ROI:
ROI = (Final Value of Investment – Initial Value of Investment) / Cost of Investment x 100%.
- Net Return of Investment stands for a pure earnings after all expenses such as interest rates, taxes, and dollars depreciation. This may entail dividends, interest, and capital gains (realizing a profit by selling an investment) among others.
- Cost of the investment is the amount you put into the investment at the first stage.
- Final Value of your Investment is the current market price which is laid on your investment.
Using the ROI Calculator
ROI calculator will simplify this task and let you solve the problem without referring to textbooks. Simply input the following information:
- Initial Investment: The sum of money that you used as your first fund.
- Current Value: The present face value of the holdings in your portfolio.
- Total Dividends/Interest Earned (optional):The net sale value for the shares will be got. Also, through the holding period, you might have got the dividends and interest payment.
- Total Fees/Commissions (optional): The biggest investment cost would be in the form of the fees or commission which is charged in the process of buying or selling the investment.
After you supplied these details, the ROI calculator will start calculating your ROI and output a percentage.
Annualized ROI
The simple ROI formula can definitely be wide of the mark. The fact that it gives only a general understanding of the overall profitability and it doesn’t consider investor’s expectation of profit during the given time is the issue here. This can also be the case when making comparisons between investments that were held for different times.
In the context of this, financial experts always ask the calculation of the annual ROI rate. This figure represents the overall universal rate of return after considering the total return on investment. This makes it easier for you to make comparisons between for any number of investments you may hold in your portfolio.
Here’s a helpful analogy: Consider that you own both of the company shares. One company has 20% ROI from one year and shares other provides only 10% ROI in two years. At first sight, the first share appears to be more opportunistic. Yet, the ROI of the share only may appear be higher than that of the second one if the amount is annualized.
The tools to do this are the input ROI calculator. Various online ROI calculators form a group including, but not limited to, in with are included, ROI calculator, investment calculators, mutual fund calculators, SIP calculators, FD calculators and, also, specific calculators for lump sum return investment. They can accommodate the holding period to calculate the annualized ROI.
You can achieve this through evaluation of the ROI calculator and get an all-inclusive concept of the annualized ROI, which plays an important role in smart investment decisions.
Benefits of Using ROI
- Easy to understand: ROI is a simple computation that has a straightforward meaning, and even those without a financial background can easily understand it.
- Compares investments: ROI provides you with a scale by which you can assess the various investments and make the right decision concerning your portfolio.
- Tracks performance: ROI enables you track the success of your investments over time and in that way identify zones of improvement.
Limitations of ROI
- Doesn’t consider risk: ROI reveals nothing about the underlying risks of an investment. High ROI can be quite attractive, it could however mean a risky investment.
- Ignores time value of money: This time value of money is not included in the standard ROI formula. A dollar today is worth more than a dollar for the next day.
Conclusion:
ROI provides an essential guide for any investor. Through ROI calculator and interpreting ROI you will be able to make well-founded investment decisions, and watch the accomplishments of your funds. Recall that ROI is a single element of the entire investment. Weight factors that include risk tolerance and investment goals when making investment decisions.