Explore commonly used personal finance terms.
The annual return on investment (ROI) is the percentage gain or loss on an investment over one year, calculated by dividing the profit by the initial investment cost. This metric helps investors assess the effectiveness of an investment, making it easy to compare different assets or portfolios. A high annual ROI indicates strong performance, though it should be viewed alongside risk and time horizon factors. Annual ROI helps investors make informed decisions based on an asset’s annual growth relative to its cost.
