We’ve looked at what return on investment (ROI) is and how traders can use it to make more informed investment decisions. The return on investment formula is a core part of tracking the performance of any portfolio, investment, or business.
As we’ve discussed, ROI isn’t the ultimate metric, but it can be useful. You also need to consider opportunity cost, risk/reward ratio, and other factors that may have an impact on your choice between different investment opportunities. As a starting point, however, ROI can be a good barometer to evaluate a potential investment.