Return on investment (ROI) is one of the most commonly used measures of performance. It is popular because investors want to know how much they are making on an investment. In order to determine your ROI, just divide your gain or loss by the amount of your initial investment. This is also the case with a monthly return on investment. The challenge is determining the cost and return for one month.
- Skill level:
- Moderately Easy
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Determine the cost of the investment. This is the full cost of acquiring the asset.
Determine the monthly income you will make from the investment. This will vary by investment. For bonds, income is usually semi-annual. The easiest way to calculate this is to figure the annual amount and then divide by 12. For rental property, the income is the monthly rent.
Calculate the monthly ROI. This is the monthly income divided by the monthly cost of the asset. For some assets this means distributing the cost over a certain period of time, like a payment. For instance, the best proxy for cost in terms of an asset is the total cost of the asset, including all transaction costs.
Divide your income (or loss) by the cost of the investment. Multiply the answer by 100 for your monthly ROI in percentage terms.
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