Stock Market Glossary
ROI
Return on Investment – Ratio of profit to capital employed.
In brief: Return on Investment – Ratio of profit to capital employed.
Meaning in practice
ROI is a quick measure of the efficiency of an investment. For comparability, it must be based on a period of time – a 50% ROI over ten years is significantly less than 50% per year.
Context for investors and traders
The term helps put market information into context. Its relevance depends on the instrument, investment horizon and current market situation, so it should be read with other data and a personal risk framework.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
