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