Calculating return on investment percentage

Return on investment captures the projected earnings an investor can get from his capital investment. This is a critical concept when it comes to investment and every good businessman knows this. It is used by all to measure the slice of the pie that will accrue to them. The investor is checking how much more can this capital investment yield at the end of the time period. The entrepreneur is using it as a bait to attract financial support. All in all the return on investment cannot be ignored by either the investor or business owner without heavy casualties. The truth is even with this heightened awareness of the importance of this simple index of measurement; there are still so many mistakes that can be traced to the return on investment.

WHAT IS REALISTIC RETURN ON INVESTMENT?

There is no doubt that every investor wants to make the most from his investment. It is also true that, there is a limit to what can be made from any genuine investment. Though there is ceiling value, there must be a way of finding out what is realizable in any investment. When investors ask for too much, beyond what is realizable, they open themselves up to fraudsters and scammers. For most times when the promised return on investment is way too high, there is danger lurking around.

We cannot lump everything together and arrive at a range of value for a realistic return on investment, so we will split into five groups and handle them thus.

- SPECULATIVE INVESTMENT

This is a place which has really high returns, but note this, the higher the return, the higher the risk involved. One investment under this group is gold. How things work in this category is by speculations. Now there are times when you will be right and there will be much profit, but here can be other times too, and there is no predicting the duration of the winning or losing streak.

- STOCKS AND FUNDS

Investing in stocks is more risky than investing in stock index funds, because even though you can lose money you cannot lose everything. Savings have a higher safety value but of course with a lower return on investment. There are good times when a stock can yield a return on investment as high as 96% and there are times it can yield a loss of almost 50%

- REAL ESTATE

Many rich people have promoted real estate as the ultimate source of wealth, it is said to yield very high returns on investment and indeed it does, but not necessarily for everyone. Real estate is more than meets the eye, there can be no rush if you expect a good return on investment from real estate. You must take your time and learn the ropes, do the work and research properly into the property market, a few strings of connection will also come in handy when you are stuck.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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