Bitcoin Halving | Get up to $50 of Bitcoin with a Ledger wallet.

Shop now

Up your Web3 game

Ledger Academy Quests

  • Test your knowledge
  • Earn POK NFTs
Play now See all quests

Return on Investment (ROI) Meaning

Sep 5, 2023 | Updated Sep 5, 2023
ROI, or Return on Investment, is a financial metric used by investors to assess the profitability and performance of an investment by measuring the profit relative to its initial cost,

What is Return on Investment (ROI)? 

ROI, or Return on Investment, serves as a crucial metric for investors seeking to assess the performance and growth of their investments. It quantifies the profit generated by an asset relative to its initial cost, offering valuable insights into the investment’s outcome.

A positive ROI indicates that the investment is yielding a profit, whereas a negative or low ROI suggests losses or results falling short of expectations. Calculating ROI follows a straightforward formula:

ROI = (Current Value of Investment – Total Cost of Investment) / Total Cost of Investment

To express ROI as a percentage, multiply the result by 100. For instance, consider Bob, who purchased 10 units of Ethereum at $10,000, or $1,000 each. If the value of ETH appreciates to $1,800, Bob’s ROI would amount to 80%.

ROI finds utility not only in traditional financial markets but also within the cryptocurrency space. Investors rely on ROI to gauge the potential of a digital asset. Nonetheless, the formula does have its limitations.

One notable limitation is its disregard for timeframes when calculating ROI, potentially omitting vital information about an investment’s performance. To illustrate, if Bob’s 80% ROI took one year to achieve, while another trader garnered a 60% ROI within just four months from the same trade, the latter investment exhibits greater efficiency.

Additionally, ROI fails to account for an asset’s risk or volatility. Assets with higher risk profiles might occasionally yield a substantial ROI. However, relying solely on this metric to inform investment decisions could expose investors to potential losses. It’s crucial to consider risk factors alongside ROI to make well-informed investment choices.


A recession is a period of substantial economic downturn that lasts for months or years.

Full definition


Dencun is an upgrade on the Ethereum blockchain aimed to improve its performance by optimizing execution efficiency and data availability within the network.

Full definition

Decentralized Finance

Decentralized Finance (DeFI) refers to financial applications and services that are built on a blockchain and operate without a central governing authority (hence, “decentralized”).

Full definition