ROI stands for Return On Investment. This is a percentage that indicates how much profit or loss an investment generates.
Most cryptocurrency and portfolio apps have an ROI feature. In them, ROI is used to indicate gains or losses. It is an easy-to-use tool that gives a clear insight into the performance of your investments. ROI is also used to compare other types of investments and trading activities, for example, real estate or in the stock market. ROI can be used over any time period.
ROI is calculated using the following formula: ROI = (current investment value - initial investment value) / initial investment value * 100.
For a €200 investment in Bitcoin worth €220, the ROI is calculated as follows:
(€220.00 - €200.00) / €200.00 * 100 = 10% profit.
There are some limitations to using ROI to determine profit or loss. For example, ROI does not take into account the time period. When comparing two investments, the duration of the investment must be taken into account. For example, an investment with an ROI of 20% over 12 months is no better than an investment with an ROI of 15% over six months. To compare investments, it is important to look at the same time period.
