Question 1

What is ROI?

Accepted Answer

ROI (Return on Investment) measures how much you gained relative to what you invested. Absolute ROI = (Final Value - Invested) / Invested x 100.

Question 2

What is the difference between absolute and annualised ROI?

Accepted Answer

Absolute ROI is the total percentage gain regardless of time. Annualised ROI (CAGR) spreads that gain evenly across the holding period, so you can fairly compare investments held for different lengths of time.

Question 3

What is a good ROI?

Accepted Answer

It depends on the asset and the time period. For long-term equity, an annualised ROI of 11-14% is considered good in India. Always compare ROI against inflation and a relevant benchmark.

Question 4

Does ROI account for risk?

Accepted Answer

No. ROI only measures return, not the risk taken to achieve it. Two investments with the same ROI can carry very different levels of risk, so always consider both.

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