ROI Calculator

What is an ROI Calculator?

An ROI calculator is a tool that helps assess the profitability of an investment. It considers the initial cost of the investment and the total return you expect to receive. By crunching these numbers, it provides a percentage that reflects how much profit you’ll make relative to what you invested. This helps you compare different investment options and choose the one with the best potential return.

What is the Return on Investment in India?

Return on Investment, or ROI, is like a report card for your money. It tells you how much profit you make compared to what you invest. Imagine buying a scooter for ₹50,000 and earning ₹2,000 each month renting it out. The calculator would show you a positive return, like 48% per year. This helps you decide if the scooter is a worthwhile investment, like getting good grades on a test!

What is a Good Return on Investment?

• 5-7% ROI: This is a common benchmark for good returns, particularly for lower-risk options.
• Any positive return is generally good, especially if it beats inflation (rising cost of living).
• Up to 10% of your ROI is generally considered strong, especially over a reasonable time frame. More common with riskier investments like stocks or certain mutual funds.
• While high-risk stocks might aim for 15%+ (but come with a higher chance of loss).

Best 20 Percent Return on Investment Options in India

A 20% return on investment (ROI) in India sounds amazing! Here’s a quick option,

1. Stocks: The Indian stock market can grow fast, offering a chance for high returns. But stocks are risky – their prices can swing wildly, so you could lose money. ¹stocks with over 20% return in each of the last 5 years Website: Economic Times
2. Real Estate: Indian real estate has a history of good returns, with property values often increasing. This can lead to 20% ROI or more. However, real estate is less flexible (it can be slow to sell) and can have hidden costs like maintenance.
3. Mutual Funds: Some SIP mutual funds, which pool investor money for various assets, have delivered over 20% returns in some years. However, their performance can vary greatly depending on the fund’s strategy and market conditions.

Important Reminders:

• Risk & Reward: Generally, higher potential returns mean higher risk. Be prepared for potential losses, especially with stocks.
• Past Performance Isn’t a Promise: Just because an investment did well before doesn’t guarantee future success.

ROI Calculation Formula With Example

Imagine you buy some gold jewellery for ₹20,000. A year later, you sell it for ₹24,000. The ₹4,000 profit is your net gain from the investment. ROI helps you see the profit of what you spent.

In this example, ROI = (₹4,000 profit / ₹20,000 cost) x 100 = 20%. So, your investment returned 20% of its cost as profit. A higher ROI generally indicates a better return on your investment.

How to use an online ROI calculator

1. Find it online: Look for an “ROI calculator” and choose a reputable website.
2. Input your investment details: The calculator will likely have sections for the initial investment amount (what you spent) and the return amount (what you earned).
3. See the results instantly: Most online calculators update automatically, so you don’t need to press any buttons. You’ll see your ROI displayed as a percentage. The calculator might also show your total profit or loss.
4. Interpret the results: A higher ROI percentage generally indicates a better return on your investment. Analyze the results to understand how much profit you made compared to the initial cost.

Calculating Return on Investment in Excel

1. Set up your data: Open a new Excel sheet and create two columns. In one, list the cost of your investments (e.g., money spent buying a product). In the other, enter the revenue generated by those investments (e.g., money earned selling the product).
2. Find your net profit: Create a third column. Here, for each investment, subtract the cost from the revenue to get the net profit. Imagine you bought a watch for ₹2,000 and sold it for ₹2,500. Your net profit would be ₹2,500 (revenue) – ₹2,000 (cost) = ₹500.
3. Use the ROI formula: Now comes the magic! In a fourth column, enter the ROI formula for each investment. It’s simply: = (Net Profit / Cost of Investment) x 100. In our watch example, it would be: = (₹500 / ₹2,000) x 100 which equals 25%.
4. Show it as a percentage: Excel might display the result as a decimal. To see it as a percentage, right-click the cell with the formula, choose “Format Cells,” and select “Percentage” under the “Number” format.

Top Benefits

1. Fast & Easy: No more math headaches! Enter your investment details and get your ROI in a flash.
2. Smarter Decisions: See how your investments are doing. High ROI might mean a good pick, while low ROI suggests you might need a new option.
3. Comparison Power: Compare different investments side-by-side to find the one with the most promising returns.
4. Big Picture View: ROI shows your profit or loss as a percentage of what you invested, making it easy to understand your investment’s performance.
5. Readily Available: Many free online rate-of-return calculators are available in India, making them a convenient tool.

Few Drawbacks

• Simplistic View: ROI focuses on just the financial return, ignoring factors like risk tolerance, investment goals, and market conditions. These are important for a well-rounded investment strategy.
• Data Matters: Garbage in, garbage out! The accuracy of your ROI result depends on the accuracy of the data you enter. Ensure you have reliable figures for both investment and return amounts.
• Not a Fortune Teller: While ROI calculators use past data to estimate potential returns, future performance can be quite different.
• Potential Bias: Some calculators might favour certain investments. Use calculators from reputable sources and compare results across different platforms.
• Don’t Over-Rely: return on invested capital calculators are a tool, not a magic formula. Use them alongside your own research and financial planning before making investment decisions.

Article References

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  stocks with over 20% return in each of the last 5 years Website: Economic Times