ROI vs Absolute Return vs CAGR vs XIRR vs Rolling Return: Understanding the Key Differences with Examples
"Learn the key differences between ROI, Absolute Return, CAGR, XIRR, and Rolling Return with detailed formulas, examples, and FAQs. Discover which metric best evaluates your investment performance." When evaluating investment performance, investors often encounter various metrics such as Return on Investment (ROI), Absolute Return, CAGR, XIRR, and Rolling Return. Each of these terms offers different insights, making it crucial to understand their differences and applications. In this blog, we will break down these terms, explain their formulas, provide real-life examples, and help you decide when to use each metric effectively. 🎯 1. What is ROI (Return on Investment)? Return on Investment (ROI) is a simple metric used to calculate the percentage gain or loss from an investment relative to the initial amount invested. ✅ Formula: ROI = Final Value − Initial Investment Initial Investment × 100 \text{ROI} = \frac{\text{Final Value} - \text{Initial Investment}...