Stock Market ROI Calculator (US)
Financial Terms Explained
Return on Investment (ROI)
A performance measure used to evaluate the efficiency or profitability of an investment, calculated as (Current Value - Cost) / Cost, expressed as a percentage.
Annualized ROI
The average annual return of an investment over a specified time period, accounting for compounding effects.
Dividend Yield
The annual dividend payment divided by the stock price, expressed as a percentage. It represents the return from dividends alone.
Dividend Reinvestment
The practice of using dividend payments to purchase additional shares of the stock, allowing for faster compounding of returns.
Inflation-Adjusted Value
The future value of an investment adjusted for the expected decrease in purchasing power due to inflation.
Capital Gains Tax
A tax on the profit from the sale of an investment held for more than one year (long-term) or less than one year (short-term).
Benchmark Index
A standard against which the performance of an investment can be measured, such as the S&P 500 for US stocks.
5 Smart Stock Market Investing Tips
1. Start Early and Stay Consistent: The power of compounding is strongest over long periods. Even small regular investments can grow significantly over time.
2. Diversify Your Portfolio: Spread your investments across different sectors, market caps, and asset classes to reduce risk and volatility.
3. Reinvest Dividends for Greater Returns: Automatically reinvesting dividends can significantly boost your long-term returns through compounding.
4. Consider Tax-Advantaged Accounts: Utilizing accounts like 401(k)s, IRAs, and Roth IRAs can help minimize tax implications and maximize returns.
5. Focus on Low-Cost Index Funds for Core Holdings: For most investors, a foundation of low-cost index funds can provide broad market exposure with minimal fees.