Return on Investment
Lesson 5: formula to calculate Monthly “ROI” = (1+annual return)^(1/12) - 1
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What is return on investment (ROI)?
Return on investment (ROI) is a way to measure an investment's performance. It also can be used to compare different investments.
- ROI calculation applies to not just trading or investment, but any kind of business or purchase.
- Calculating an estimated ROI base...
Projecting annual compounding rate of return using historical annual per share earnings growth rate:
Predict the Future EPS using annual earnings growth rate
Now look for the range in which the stock’s PE ratio is and multiply the PE ratio to the EPS from previous step
Find your ideal
Determine your target net worth - where you want to be in the near-term and long-term future.
The following formula is helpful:
Target Net Worth=[Your Age−25]∗[1/5∗Gross Annual Income]
A 50-year-old with a gross annual income of $75,000 might aim ...
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