{"id":74624,"date":"2025-09-19T11:29:44","date_gmt":"2025-09-19T09:29:44","guid":{"rendered":"https:\/\/www.sage.com\/en-za\/blog\/?p=74624"},"modified":"2025-10-21T14:40:25","modified_gmt":"2025-10-21T12:40:25","slug":"roi-calculator","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-za\/blog\/roi-calculator\/","title":{"rendered":"Return On Investment (ROI) calculator (Sales &#038; Investment option)"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-za\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tReturn On Investment (ROI) calculator (Sales &#038; Investment option)\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-09-19T11:29:44+02:00\">Sep 19, 2025<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"Return On Investment (ROI) calculator (Sales &#038; Investment option)\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-za\/blog\/roi-calculator\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n<div class=\"wp-block-post-author\">\n\t\t\t<div class=\"co-authors\">\n\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-za\/blog\/author\/yassirmalik\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2024\/03\/Yassir-Malik.jpg\" class=\"entry-author__image\" alt=\"yassir-malik-profile-picture\" \/>\t\t\t\t<span class=\"entry-author__name\">Yassir Malik<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t<\/div>\n\t\t<\/div>\n\n\n\n\n\n<p>Whether you\u2019re evaluating a potential purchase or analysing an existing asset, you need to know how to measure the return on investment (ROI).<\/p>\n\n\n\n<p>Are you considering an investment but need confirmation that the gains outweigh the costs by a certain ratio? <\/p>\n\n\n\n<p>Have your business partners requested profitability insights prior to making a major acquisition?<\/p>\n\n\n\n<p>In this article, we\u2019ll cover the essentials of ROI, including how to calculate it and maximise it.<\/p>\n\n\n\n<p>We\u2019ll also&nbsp;provide an ROI calculator that can do the math for you or validate your numbers.<\/p>\n\n\n\n<p>By the end of this article, you\u2019ll know how to calculate ROI for use cases ranging from investments to marketing. <\/p>\n\n\n\n<p>You\u2019ll also understand both the limitations of ROI and common calculation mistakes.<\/p>\n\n\n\n<p><strong>Here\u2019s what we\u2019ll cover:<\/strong><\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-roi-calculator\" data-level=\"2\">ROI calculator<\/a><\/li><li><a href=\"#h-what-is-roi\" data-level=\"2\">What is ROI?<\/a><\/li><li><a href=\"#h-how-do-you-calculate-roi\" data-level=\"2\">How do you calculate ROI?<\/a><\/li><li><a href=\"#h-what-is-the-difference-between-roi-and-annualised-roi\" data-level=\"2\">What is the difference between ROI and annualised ROI?<\/a><\/li><li><a href=\"#h-limitations-of-roi\" data-level=\"2\">Limitations of ROI<\/a><\/li><li><a href=\"#h-mistakes-when-calculating-roi\" data-level=\"2\">Mistakes when calculating ROI<\/a><\/li><li><a href=\"#h-how-to-maximise-your-roi\" data-level=\"2\">How to maximise your ROI<\/a><\/li><li><a href=\"#h-what-is-an-average-or-good-roi\" data-level=\"2\">What is an average or good ROI?<\/a><\/li><li><a href=\"#h-how-is-roi-different-from-roe\" data-level=\"2\">How is ROI different from ROE?<\/a><\/li><li><a href=\"#h-final-thoughts\" data-level=\"2\">Final thoughts<\/a><\/li><\/ul><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-roi-calculator\">ROI calculator<\/h2>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-embed-handler wp-block-embed-embed-handler wp-block-sage-embed\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"ROI calculator\" src=\"https:\/\/assets.sage.com\/calculators\/roi\/dist\/en-ZA\/index.html\" width=\"100%\" height=\"100vh\" class=\"sage-embed-resize\" style=\"border:none;min-height:500px;\"><\/iframe>\n<\/div><\/figure>\n\n\n\n<p>This calculator works in 2 different ways.<\/p>\n\n\n\n<p>It can:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Calculate ROI based on the amount invested and the amount returned over time<\/li>\n\n\n\n<li>Calculate investment return and growth over a period of time<\/li>\n<\/ol>\n\n\n\n<p>To calculate ROI, select the \u201cInvestment ROI\u201d option. Input the amount invested and the amount returned (actual or projected).<\/p>\n\n\n\n<p>Then, enter either the start and end dates, or the total years of investment.<\/p>\n\n\n\n<p>Press <strong>\u201cCalculate\u201d<\/strong> to see the total gain, investment ROI, and annualised ROI.<\/p>\n\n\n\n<p>We\u2019ll explain these metrics in depth below.<\/p>\n\n\n\n<p>To calculate investment growth, select the \u201cGrowth calculator\u201d option.<\/p>\n\n\n\n<p>Input the amount invested and the ongoing contributions (including the frequency).<\/p>\n\n\n\n<p>Then, enter the years of growth and the interest rate. <\/p>\n\n\n\n<p>Press <strong>\u201cCalculate\u201d<\/strong> to see the total contribution, total interest, investment worth, and investment ROI.<\/p>\n\n\n\n<p>You\u2019ll also see a chart that breaks down the contributions and balance for the investment by year.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-roi\">What is ROI?<\/h2>\n\n\n\n<p>Return on investment, or ROI, is a metric that measures the performance of an investment by comparing the gain from the investment to its initial cost.<\/p>\n\n\n\n<p>ROI is typically expressed as a percentage.<\/p>\n\n\n\n<p>ROI serves 2 main purposes:<\/p>\n\n\n\n<p><strong>Measures the return<\/strong> from investments or acquisitions, which helps you to clarify past performance for reporting purposes.<\/p>\n\n\n\n<p>You can also use ROI to evaluate the gain or loss from past investments or endeavours.<\/p>\n\n\n\n<p><strong>Forecasts the rate of return<\/strong>, which helps you to gauge profitability and you can forecast the potential returns before investing in stocks, funds, or real estate.<\/p>\n\n\n\n<p>You can use it to compare a portfolio of investments to decide which are better for further investment, or to look at new ventures to decide what might be worth investment.<\/p>\n\n\n\n<p>For example, when acquiring a new company or if you want to purchase assets for your business, such as machinery.<\/p>\n\n\n\n<p>ROI is used widely in business to track performance in reporting and making decisions.<\/p>\n\n\n\n<p>When used for marketing, ROI is a useful tool for you to review where budgets are best allocated and to see if specific campaigns have added value to the business.<\/p>\n\n\n\n<p>Although, as with any measurement, it is important to measure campaigns in isolation to avoid influence from other factors that might show a false picture.<\/p>\n\n\n\n<p>Return on investment is an easy-to-understand metric that offers a simple overview of performance and is universally understood in business.<\/p>\n\n\n\n<p>However, it does have limitations and can be misleading if it\u2019s not presented or provided with context.<\/p>\n\n\n\n<p>Note that it is possible for investments to generate a positive or negative return:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>When the return outperforms the cost, the ROI is positive. This is known as being in the black.<\/li>\n\n\n\n<li>When the cost exceeds the return, the ROI is negative. This is known as being in the red.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-do-you-calculate-roi\">How do you calculate ROI?<\/h2>\n\n\n\n<p>The quickest way to calculate ROI is to use our calculator above.<\/p>\n\n\n\n<p>To do your own manual calculations, you can also use the ROI calculation formulas below.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<figure class=\"wp-block-pullquote\"><blockquote><p>NOTE<br><br>To learn to calculate ROI manually, try running your own calculations with the formulas and then check them against the calculator.<\/p><\/blockquote><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-standard-roi-formula\">Standard ROI formula<\/h3>\n\n\n\n<p><strong>ROI = ((Value of Investment \u2013 Cost of Investment) \/ Cost of Investment) x 100%<\/strong><\/p>\n\n\n\n<p>For example, suppose you invest R100,000 and end up with a return of R150,000.<\/p>\n\n\n\n<p>Your ROI would be:<\/p>\n\n\n\n<p><strong>ROI = ((R150,000 \u2013 R100,000) \/ R100,000) x 100% = 50%<\/strong><\/p>\n\n\n\n<p>The basic ROI formula above doesn\u2019t account for the investment\u2019s time frame.<\/p>\n\n\n\n<p>To factor in the holding time, use the annualised ROI formula below instead.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-annualised-roi-formula\">Annualised ROI formula<\/h3>\n\n\n\n<p><strong>Annualised ROI = ((1 + ROI) ^ (1 \/ n) \u2013 1) \u00d7 100%<\/strong><\/p>\n\n\n\n<p><em>n =number of years the investment is held<\/em><\/p>\n\n\n\n<p>For example, suppose you achieved 50% ROI over the course of 2 years.<\/p>\n\n\n\n<p>Your annualised ROI would be:<\/p>\n\n\n\n<p><strong>Annualised ROI = ((1 + 0.5) ^ (1 \/ 2) \u2013 1) \u00d7 100% = 22.5%<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-roi-calculation-examples\">ROI calculation examples<\/h3>\n\n\n\n<p>Let\u2019s walk through some examples.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-calculating-roi-for-marketing\">Calculating ROI for marketing<\/h4>\n\n\n\n<p>Suppose you managed a marketing campaign with an initial cost of R5,000.<\/p>\n\n\n\n<p>And the campaign generated a return of R25,000. The ROI would be:<\/p>\n\n\n\n<p><strong>ROI = ((R25,000 \u2013 R5,000) \/ R5,000) x 100% = 400%<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-calculating-roi-for-business-investment\">Calculating ROI for business investment<\/h4>\n\n\n\n<p>Say your company is considering a business investment priced at R500,000.<\/p>\n\n\n\n<p>And you\u2019ve projected a future valuation of R2 million. The ROI would be:<\/p>\n\n\n\n<p><strong>ROI = ((R2,000,000 \u2013 R500,000) \/ R500,000) x 100% = 300%<\/strong><\/p>\n\n\n\n<p>If the valuation is projected for 10 years from now, the annualised ROI would be:<\/p>\n\n\n\n<p><strong>Annualised ROI = ((1 + 3) ^ (1 \/ 10) \u2013 1) \u00d7 100% = 14.9%<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-calculating-roi-for-real-estate\">Calculating ROI for real estate<\/h4>\n\n\n\n<p>Now, suppose your company invested in real estate at an up-front cost of R25,000.<\/p>\n\n\n\n<p>And the real estate ultimately generated a return of R10,000.<\/p>\n\n\n\n<p>The ROI would be:<\/p>\n\n\n\n<p><strong>ROI = ((R10,000 \u2013 R25,000) \/ R25,000) x 100% = -60%<\/strong><\/p>\n\n\n\n<p>Because the cost exceeds the return, the ROI is negative.<\/p>\n\n\n\n<p>If the investment period lasted 5 years, the annualised ROI would be:<\/p>\n\n\n\n<p><strong>Annualised ROI = ((1 -0.6) ^ (1 \/ 5) \u2013 1) \u00d7 100% = -16.7%<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-the-difference-between-roi-and-annualised-roi\">What is the difference between ROI and annualised ROI?<\/h2>\n\n\n\n<p>For a standard ROI that is measured between a start and an outcome, the time frame is not a factor that affects the result.<\/p>\n\n\n\n<p>Even over a year or a decade, the ROI remains the same so long as neither the cost nor the gain changes.<\/p>\n\n\n\n<p>A basic ROI would be used to measure investment in a marketing campaign, or the purchase of an asset.<\/p>\n\n\n\n<p>For an annualised ROI, the holding period of the investment is accounted for in the calculation and factors in compounding, which incorporates how an asset generates additional earnings either from capital gains, or from interest over time, or from both.<\/p>\n\n\n\n<p>As you can see in the examples above, longer holding periods lead to bigger differences between ROI and annualised ROI.<\/p>\n\n\n\n<p>Annualised ROI reflects an investment\u2019s annual performance, but it can also be calculated in quarters, halves, and other time frames by turning the holding period into fractions of a year.<\/p>\n\n\n\n<p>Annualised ROI is best used for investments with returns that are either less predictable or that have variable interest rates.<\/p>\n\n\n\n<p>For example, you can use it when evaluating stocks or funds.<\/p>\n\n\n\n<p>This metric is also helpful for comparing the performance of multiple investments. <\/p>\n\n\n\n<p>Since it factors in compound interest, annualised ROI simplifies the process of comparing investments with different holding periods.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-limitations-of-roi\">Limitations of ROI<\/h2>\n\n\n\n<p>Despite being a widely used metric, ROI does have some limitations that need to be considered:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-doesn-t-account-for-the-holding-period\">Doesn\u2019t account for the holding period<\/h3>\n\n\n\n<p>The standard ROI calculation doesn\u2019t reflect the time period for the investment, which may result in an overly simplistic metric.<\/p>\n\n\n\n<p>To assess how the holding period affects the efficiency of the investment, use annualised ROI.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-doesn-t-include-all-relevant-costs\">Doesn\u2019t include all relevant costs<\/h3>\n\n\n\n<p>Some investments continue to generate additional costs over time.<\/p>\n\n\n\n<p>For example, real estate investments typically incur property taxes, mortgage insurance, and maintenance costs.<\/p>\n\n\n\n<p>If you don\u2019t factor these costs into the calculation, you\u2019ll end up with an inaccurate ROI.<\/p>\n\n\n\n<p>This can provide a skewed assessment of the investment, which may lead to uninformed decisions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-doesn-t-factor-in-contributions\">Doesn\u2019t factor in contributions<\/h3>\n\n\n\n<p>Many investments have a one-time initial cost.<\/p>\n\n\n\n<p>However, others have monthly, quarterly, or annual contributions.<\/p>\n\n\n\n<p>The standard ROI formula doesn\u2019t account for ongoing contributions.<\/p>\n\n\n\n<p>To calculate ROI for an investment with ongoing contributions, use our growth calculator above.<\/p>\n\n\n\n<p>It reveals investment ROI, investment worth, and balance over time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-mistakes-when-calculating-roi\">Mistakes when calculating ROI<\/h2>\n\n\n\n<p>ROI is one of the simplest and most straightforward metrics for measuring profitability. <\/p>\n\n\n\n<p>However, it\u2019s important to avoid common mistakes when calculating ROI:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-neglecting-to-estimate-costs-accurately\"><strong>Neglecting to estimate costs accurately<\/strong><\/h3>\n\n\n\n<p>Without a complete list of the cost of the investment, acquisition, or business initiative, you won\u2019t be able to forecast ROI accurately.<\/p>\n\n\n\n<p>Before calculating ROI, make sure to consider hidden costs like maintenance or licensing.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-measuring-the-wrong-outcomes\"><strong>Measuring the wrong outcomes<\/strong><\/h3>\n\n\n\n<p>This mistake is a particular concern for marketing campaigns.<\/p>\n\n\n\n<p>When calculating ROI, always measure the metrics that contribute to the company\u2019s bottom line.<\/p>\n\n\n\n<p>Rather than factoring in engagement, for example, measure revenue.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-failing-to-consider-risk\"><strong>Failing to consider risk<\/strong><\/h3>\n\n\n\n<p>Every investment carries some level of risk, from the value of the investment to the timeline for the acquisition.<\/p>\n\n\n\n<p>To ensure you can absorb the probable risk level, calculate ROI based on various likely outcomes.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-forgetting-to-weigh-non-monetary-benefits\"><strong>Forgetting to weigh non-monetary benefits<\/strong><\/h3>\n\n\n\n<p>ROI measures profitability.<\/p>\n\n\n\n<p>However, almost every investment also brings non-monetary benefits that can change the math completely.<\/p>\n\n\n\n<p>Consider factors like corporate reputation or employee satisfaction when reviewing outcomes.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-confusing-profit-with-cash\"><strong>Confusing profit with cash<\/strong><\/h3>\n\n\n\n<p>While investments are cash, ROI doesn\u2019t reflect a cash outcome.<\/p>\n\n\n\n<p>Instead, it indicates profit.<\/p>\n\n\n\n<p>To get a more complete financial picture of an investment, consider the cash flow rather than the profit.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-not-measuring-roi-over-time\"><strong>Not measuring ROI over time<\/strong><\/h3>\n\n\n\n<p>It\u2019s crucial to measure ROI before pursuing an investment. But that shouldn\u2019t be the only time you consider this metric.<\/p>\n\n\n\n<p>Instead, continue to measure the actual ROI of existing investments so you can make informed decisions about future investments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-maximise-your-roi\">How to maximise your ROI<\/h2>\n\n\n\n<p>You can maximise return on investment by taking these actions:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-consider-a-riskier-investment\"><strong>Consider a riskier investment<\/strong><\/h3>\n\n\n\n<p>Generally, the higher the risk level, the higher the ROI. <\/p>\n\n\n\n<p>To maximise ROI, consider increasing your exposure to risk.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-contribute-more-frequently\"><strong>Contribute more frequently<\/strong><\/h3>\n\n\n\n<p>Investments like stocks and bonds allow additional contributions over time. <\/p>\n\n\n\n<p>To maximise ROI, contribute increased amounts more frequently.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-increase-the-holding-period\"><strong>Increase the holding period<\/strong><\/h3>\n\n\n\n<p>Over time, compound interest can increase the worth of investments significantly. <\/p>\n\n\n\n<p>To maximise ROI, consider longer-term investments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-an-average-or-good-roi\">What is an average or good ROI?<\/h2>\n\n\n\n<p>Each type of investment has its own average ROI. <\/p>\n\n\n\n<p>Here are some benchmarks to consider as you evaluate investment performance:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Real estate<\/h3>\n\n\n\n<p>Can be subject to ups and downs on a short-term basis and can deliver higher returns, but over long-term periods, it is seen as a low-risk investment with a modest return average.<\/p>\n\n\n\n<p>Real estate in South Africa has delivered an average annual return of approximately 5% to 8% over the past decade, based on performance of listed Real Estate Investment Trusts (REITs) on the Johannesburg Stock Exchange (JSE), such as those tracked by the South African Property Index (SAPY).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Stocks<\/h3>\n\n\n\n<p>Stocks* as measured by the JSE All Share Index (ALSI), have historically delivered average annual returns of around 8% to 12%, depending on market cycles and sector performance.<\/p>\n\n\n\n<p>South African stocks, as measured by the JSE All Share Index (ALSI), have historically delivered average annual returns of around 8% to 12%, depending on market cycles and sector performance.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Bonds<\/h3>\n\n\n\n<p>Bonds* have a 5.9% average annual return.<\/p>\n\n\n\n<p>Bonds have fixed yields based on factors like the issuer and the duration.<\/p>\n\n\n\n<p>As a result, they tend to be less risky investments, but in recent years they have seen unprecedented volatility, which has contributed to an increase in the ROI.<\/p>\n\n\n\n<p>South African government bonds have historically offered yields between 7% and 10%, depending on the term and prevailing interest rates set by the South African Reserve Bank (SARB).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Gold<\/h3>\n\n\n\n<p>Gold* has an 8% average annual return. <\/p>\n\n\n\n<p>In terms of uncertainty, gold was traditionally seen as a safe-haven investment, but that has changed.<\/p>\n\n\n\n<p>Now, because of quantitative easing, ultra-low interest rates and the rise of cryptocurrency, gold has lost its assurance due to significant changes in investors\u2019 behaviour in recent years.<\/p>\n\n\n\n<p>The price of gold has been fluctuating considerably, making it more of a volatile investment compared to bonds.<\/p>\n\n\n\n<p>Gold remains a popular hedge against inflation and rand volatility in South Africa.<\/p>\n\n\n\n<p>While returns vary, gold has delivered average annual returns of around 7% to 10% over the past decade, influenced by global demand and local currency fluctuations.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><em>*These averages are based on <a href=\"https:\/\/www.statista.com\/statistics\/1061434\/gold-other-assets-average-annual-returns-global\/\" target=\"_blank\" rel=\"noreferrer noopener\">data from 1971 to 2024<\/a>, which provides a relatively long-term view of ROI. For more near-term ROI data, consider averages from the past 10 years.<\/em><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>However, when you consider an investment, it\u2019s important to go beyond these benchmarks alone. For example, investment time is a key factor.<\/p>\n\n\n\n<p>Generally, the longer the holding period, the higher you want the ROI to make the investment a worthwhile use of capital.<\/p>\n\n\n\n<p>You should also factor in risk tolerance.<\/p>\n\n\n\n<p>If you have a higher tolerance for risk, you may be open to more volatility in exchange for a higher ROI.<\/p>\n\n\n\n<p>Likewise, if you have a lower tolerance for risk, you may accept a lower ROI in exchange for stable growth.<\/p>\n\n\n\n<p>Make sure to consider your own key performance indicators (KPIs) as well.<\/p>\n\n\n\n<p>Even if an investment performs well based on industry or historical benchmarks, it must align with your personal goals to be considered good.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-is-roi-different-from-roe\">How is ROI different from ROE?<\/h2>\n\n\n\n<p>While ROI reflects the performance of an investment, return on equity (ROE) reflects the performance of a company.<\/p>\n\n\n\n<p>You calculate it by dividing the company\u2019s net income by the shareholders\u2019 equity.<\/p>\n\n\n\n<p>Let\u2019s compare the 2 metrics side by side.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Return On Investment \u2013 ROI<\/strong><\/td><td><strong>Return On Equity \u2013 ROE<\/strong><\/td><\/tr><tr><td>Measures the profitability of an investment.<\/td><td>Measures the profitability of a corporation.<\/td><\/tr><tr><td>Factors in initial investment cost and return.<\/td><td>Factors in net income and shareholder equity.<\/td><\/tr><tr><td>ROI = <em>((Value of Investment \u2013 Cost of Investment) \/ Cost of Investment) x 100%<\/em><\/td><td>ROE = <em>Net Income \/ Shareholder Equity x 100%<\/em><\/td><\/tr><tr><td>If an investment has an initial cost of R100,000 and a return of R125,000, the ROI is 25%.<\/td><td>If a company has a net income of R1 million and shareholder equity of R4 million, the ROE is 25%.<\/td><\/tr><tr><td>Helps with comparing the efficiency of multiple investments.<\/td><td>Helps with comparing the efficiency of multiple companies.<\/td><\/tr><tr><td>May show skewed results, as it doesn\u2019t reflect the holding period.<\/td><td>May show skewed results, as it can mask inconsistent income.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-final-thoughts\">Final thoughts<\/h2>\n\n\n\n<p>Once you understand how to calculate ROI and when to use annualised ROI, you can make informed decisions about short- and long-term investments.<\/p>\n\n\n\n<p>Use our ROI calculator to run the numbers instantly. <\/p>\n\n\n\n<p>Or use it to confirm your calculations and reinforce your confidence in your investments.<\/p>\n\n\n\n<p>Cloud-based business planning solutions like our <a href=\"https:\/\/www.sage.com\/en-za\/accounting-software\/\" target=\"_blank\" rel=\"noreferrer noopener\">accounting software<\/a> provide assistance with financial management, making it easier to plan for business growth.<\/p>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice enewsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get a roundup of our best business advice in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-84fe79b5-668d-41f8-a0cc-6229018c4ac9\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg\" class=\"single-cta__image\" 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mistakes.<\/p>\n","protected":false},"author":1774,"featured_media":71360,"menu_order":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[25,27],"tags":[294,313,189,339,214],"business_type":[2,5],"lilypad":[],"context":[],"industry":[],"persona":[6,15,16],"imagine_tag":[52,53,353,68,73,85,86],"coauthors":[401],"class_list":["post-74624","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","category-strategy-legal-operations","tag-accountants","tag-bookkeeping","tag-financial-insights","tag-profit-loss","tag-trending-topics","business_type-small-business","business_type-accountants"],"sage_meta":{"region":"en-za","author_name":"Yassir 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