Definition
A measure of how much profit you earn on an investment relative to its cost, helping you decide if it’s worthwhile.
What to consider
- Check that its investment strategy matches your risk tolerance.
- Review its fees to ensure they’re reasonable.
- Monitor your account occasionally even if it’s automated.
Real world scenarios
- Marco tracks how much profit each rental property yields compared to the cost of purchasing and renovating it, calculating the ROI of his real estate endeavors.
- Tina invests in a friend’s startup, measuring ROI after the company launches a successful product line that boosts her returns beyond initial projections.
- Regularly reviewing her portfolio’s ROI helps Candice decide which assets to hold, sell, or reinforce for optimal performance.
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