Question 1

What is ROI?

Accepted Answer

ROI (Return on Investment) measures profitability: (gain - cost) / cost × 100. A $2,000 gain on a $10,000 investment is a 20% ROI.

Question 2

What is annualized return?

Accepted Answer

Annualized return normalizes ROI to a yearly rate, allowing comparison of investments held for different periods. It uses the formula (final/initial)^(1/years) - 1.

Question 3

What is a good ROI?

Accepted Answer

A good ROI depends on risk and timeframe. The S&P 500 averages about 10% annually. Real estate may target 8-12%. Higher returns usually involve higher risk.

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