How to use a return on investment calculator

Return on investment (ROI) is a measure used to evaluate and analyse the performance of investment portfolios. It is important to know how to use the return on investment calculator in order to correctly interpret and compare the benefits on investments of different investment portfolios. Thus, this text highlight on how the ROI calculator is used.

How to calculate return on investment

The calculator is used to ascertain the loss or gain on investment, therefore pre-requisite information include original investment amount, investment start date, the future value or present value of the investment and the investment period. The money to be gained or lost on an investment will be obtained by simply punching this information onto the calculator.

Calculation results

The calculations will reveal the amount to be gained or lost, the investment period, return on investment expressed as a percentage as well as the simple annualized return (ROI)

Benefits of using ROI calculator

The use of the ROI calculator reduces the burden of having to know the formula of how to calculate ROI, but by just entering the information, one would immediately get the answer. It is an online service which is simple to use. It is used to evaluate the performance of an investment and compare it to other options available. The calculator is used to determine the money to be gained or lost through investing in certain portfolios. The information is used to decide on which investment counters to pick which are performing well or bad and for portfolio diversification. The results obtained by using the calculator is necessary for planning and budgeting purposes as one would know how much money to invest, the amount to be gained or lost, on which investment market as well as the counters to pick. The investment return calculator is used to determine the overall performance of the investment market such as the money market or stock market and the information is important for investment and portfolio management.

Disadvantages

The calculations are meaningless to one who is not conversant with investment language like return on investment, present value of investment or future value. The information is used for guideline purposes because the results depend on the actual performance of the investment which is affected by economic, environmental and political factors.