Now that we understand the importance of ROI, let's take a look at which ROI metrics are most commonly used:
- Average return: indicates the value of return that can be expected from an investment.
- Average return on a portfolio: the calculation of the weighted average of the average returns that can be obtained from the various assets present, the weighting being the percentage of each individual security in the total invested value.
- Easy return: this is the ratio between the change in value of an asset and the value it had at the beginning of the observation period.
- Money-weighted return (): this indicator measures the total return of a portfolio, taking into account the investor's payment and redemption decisions.
- Time-weighted return (time weighted rate of return): the key figure for return weighted over a reference period. This calculation method does not take into account the effects of deposits and withdrawals.