What is Return on Investment (ROI)?

Return on investment (ROI) is a measurement that is used to gauge the performance and profitability of an investment by comparing its current value to its initial cost. ROI is often displayed as a percentage and is calculated using the formula: ROI = (Current Value of Investment - Cost of Investment) / Cost of Investment. For example, if you invested $100 which grew to be worth $140, then the ROI would be represented as the net profits ($140 - $100 = $40) divided by the cost of investment ($100) which yields an ROI of $40/$100, or 40%.