ROI (Return on Investment)

ROI is the most fundamental measure of whether an investment was worth it. The formula is simple: (Gain

• Cost) / Cost × 100 = ROI%.

Example: You invest $10,000 in stocks and sell for $12,000.

• ROI = ($12,000 - $10,000) / $10,000 × 100 = 20%

Why It Matters:

• Positive ROI: You made money (profit)
• Negative ROI: You lost money
• 0% ROI: You broke even

Real-World Applications:

• Solar panels: $20,000 cost, $30,000 in energy savings over 20 years = 50% ROI
• Education: $50,000 degree, $200,000 lifetime earnings increase = 300% ROI
• Home renovation: $30,000 kitchen remodel, $20,000 home value increase = -33% ROI (loss)

Limitations: ROI doesn't account for time (10% in 1 year vs. 10 years is vastly different) or risk. Use it as a starting point, not the whole story.