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Return on Investment

Return on investment (ROI) helps you understand the profitability of an investment.

ROI is the gain or loss generated by interest rates, dividends, or market changes over a specific period of time, usually a year, and is often expressed as a percentage of the original investment. ROI is also known as rate of return.

Three Ways to Make Money

There are three ways that investments make money. They are:

  • earning interest
  • receiving dividends
  • selling an investment for a profit, also known as a capital gain

Remember that these returns are all taxed differently. This can affect your returns, so it’s good to understand the applicable tax implications for you.

Personal Rates of Return

Each year, your registered investment advisor’s firm must provide you with an Investment Performance Report that includes personal rates of return. Your personal rates of return are calculated based on the specifics of your account, such as:

  • the amount and timing of your deposits, withdrawals, purchases, and sales
  • the changes in the market value of your investments

This means that it’s difficult to compare your personal rates of return to general investment benchmarks, such as S&P 500, Dow Jones Industrial Average, or Nasdaq 100.

Download a sample Investment Performance Report by clicking the button below.