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Average ROI Formula:
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Average Return on Investment (ROI) is a financial metric that calculates the mean return percentage across multiple investments or time periods. It provides a simplified measure of overall investment performance.
The calculator uses the average ROI formula:
Where:
Explanation: The formula calculates the arithmetic mean of multiple ROI percentages to determine the average performance across all investments or periods.
Details: Average ROI helps investors compare performance across different investments, assess overall portfolio performance, and make informed decisions about future investments. It provides a quick snapshot of investment effectiveness.
Tips: Enter ROI values as percentages separated by commas. For example: "15, 20, 12, 18" for ROI values of 15%, 20%, 12%, and 18%. The calculator will compute the average of all provided values.
Q1: What is considered a good average ROI?
A: A good average ROI depends on the investment type and risk level. Generally, 7-10% is considered good for stock investments, while higher returns may indicate higher risk.
Q2: How does average ROI differ from annualized ROI?
A: Average ROI calculates simple arithmetic mean, while annualized ROI accounts for compounding effects over time and provides a more accurate long-term performance measure.
Q3: Can average ROI be negative?
A: Yes, if investment losses occur, average ROI can be negative, indicating an overall loss across the measured investments or periods.
Q4: What are the limitations of average ROI?
A: Average ROI doesn't account for investment duration, risk levels, or compounding effects. It should be used alongside other metrics for comprehensive analysis.
Q5: How often should I calculate average ROI?
A: Regular calculation (quarterly or annually) helps track investment performance trends and make timely adjustments to your investment strategy.