What is a good return on investment?

Key statistics on return on investments

• Average annual ROI on stocks: 13,8%
• Average annual ROI on real estate: 8,8%
• Average annual ROI on international stocks: 5,8%
• Average annual ROI on bonds: 1,6%
• Average annual ROI on gold: 0,8%
• Average annual ROI on bank savings account: 0,38%

What is ROI?

Return on investment, ROI for short, is a measure of performance expressed in a percentage. It tells you how good the return on investment is when compared to the cost of the investment. The ROI is a significant factor to keep in mind when you’re looking to invest. This is because ROI is excellent for determining how profitable and efficient the investment will be. Plus, ROI is relatively easy to calculate and applicable to many different forms of investments. You can easily use ROI to compare different investment opportunities and quickly determine which ones are more profitable than others. 

How to calculate return on investment?

You can calculate the return on investment by subtracting the cost of the investment from the ending value of the investment, then dividing that number by the cost of the investment. 

ROI= (Ending value of investment – Initial value of investment) / Initial value of an investment

To put it into an example, let’s say you invest €1000, and after one year, you have gained €90, which brings the ending value of the investment to €1090. The formula works as follows: 

(€1090-€1000)/€1000= 9%

So, in this case, the return on investment is 9%. 

What is a good ROI?

Determining whether or not a return on investment is ‘good’ is not straightforward. As you can see in the Key statistics on return on investments mentioned at the beginning of this article, it depends greatly on the type of investment you’re getting into. An ROI of 9% might be on the low side when you’re investing in stocks, but it’s a great rate if you’re investing in bonds. Especially considering that an investment in bonds comes with much lower risks than investing in stocks. 

What we’re trying to say here is that it’s not simply as straightforward as “the higher, the better” when it comes to return on investment. To determine whether or not an ROI is good, you have to take into account the risks that come with the investment and look at the big picture and the long-term possibilities. 

Fund the Stake & Make 9% bot

Have you invested in the Stake & Make 9% bot yet?

Here at BOTS, we’ve recently introduced the Stake & Make 9% bot. This bot was created by the Bots Originals team. What does it do? The Stake & Make 9% bot stakes your funds in USDC and other leading crypto assets and aims to provide a stable reward that compounds to a total of 9% annually.

Rewards are paid out on a weekly basis. What is staking? This has become a popular way to earn passive income since the rise of crypto. Put simply, you provide funds to support the processing of transactions, and you earn rewards in return. This is sometimes referred to as ‘becoming the house’. When you check out the key statistics on return on investments mentioned at the beginning of this article, you’ll find that 9% is quite a high ROI compared to other ROIs in the market. 

Do investment returns increase with inflation?

As you can imagine, inflation is essential to take into account when looking at return on investments. Because if you invest in a project with a 6% ROI, but the inflation at that time increases by 6%, in the end, your ROI boils down to zero. When inflation goes up, as we’re currently experiencing, the return on your investment doesn’t automatically go up as well. Which results in your ROI being worth less. That’s why rising inflation is bad news for investors.  

What is a good ROI during inflation?

When you put your in CDs and a savings account, the amount of money will grow (a little). But when taking inflation into account, the buying power of your money will shrink. Which makes the total amount of purchasing power you have at the end of your investment less than at the start of the investment. That’s why it’s important, especially during times of high inflation, to seek out investments with a good ROI. One way to look at it is that you give away a bit of your buying power now so that you have more buying power in the future. 

Financial and investment experts Suze Orman and Ramit Sethi recommend people to invest their money during inflation. “Investing is the single most effective way to get rich. Inflation can be bad for individuals when you just keep your money sitting in a bank account and do nothing else with it,” Sethi notes. 

What is a good return on investment currently? 

We’ve said it before. There really is no rule set in stone about what is a good ROI. However, with the current market, experts claim that a 7% return on investment is considered a good ROI. Of course, you will always have to take the risks that come with the investment into account. 

Where to invest €1000 right now?

Let’s put it in an example. Let’s say you have €10,000 to invest, and you can choose between a government bond with an ROI of 1,6% or investing in the Stake & Make 9% bot. How much money will you have made after one year? 

When you invest in the government bond:

€10,000 x 1,6% = €160

When you invest in the Stake & Make 9% bot:

Keep into account that not only is the ROI higher in and of itself (9% versus 1,6%), but also, you get paid out weekly. Due to compound interest, this will make the ending value of the investment even higher. 

€10,000 (1+0,09/52) ^ (52) (1) = €940,89

That’s a profit of over €940 instead of €160. Quite a difference! 

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Disclaimer:

This blog is for educational purposes only. The information we offer does not constitute investment advice. Please always do your own research before investing.

Any views expressed in this blog and by BOTS do not constitute a recommendation that any particular cryptocurrency (or cryptocurrency token/asset/index), portfolio of cryptocurrencies, transaction, or investment strategy is suitable for any specific person.