Return on Investment Blues

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Many individuals who invest know you always want to keep your return on investment in a positive percentage. I have for the most part done that with all of my investments over time, but wanted to take time with this blog article to demonstrate how timing has as much to do with return on investment as anything else.

First, let’s examine my previous Twitter [$TWTR] stock purchase. For my most recent Twitter stock purchase I purchased each share for $50.74 a share. The stock currently sits at $51.94. Assuming I purchased 9,000 shares of stock I would receive $10,784.10 in net profit from this transaction, for a 2.36% ROI. If I had only purchased 9 shares instead of 9,000 I would lose $5.10 in a sale and have a -1.08% ROI.

twtr2

Now let’s take into account how things would look if I made the purchase at the Twitter stock low price of $29.51 per share. If 9 stock shares were purchased at $29.51 and sold at the price of $51.94 there would be a net profit of $185.97 with a ROI of 66.07%. If 9,000 shares were purchased at the $29.51 figure the net profit would be $201,854.10 and a ROI of 76%. Notice how the ROI is only a little higher.

Second, let’s examine my previous Galloway [$ELY] purchase. For this purchase I secured each share at a value of $9.38. Currently the stock sits at $9.35. My current net profit is -$15.96 and my ROI is -46.05%

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At 2,000 shares if the stock price were to reach $9.78 net profit would be $784.10 and the ROI would be 4.18%

Finally, let’s examine my ETF purchase of $FTEC at $29.42 per share. The stock price currently sits at $32.56. If I owned 7 shares my net profit would be $6.08 and my ROI of 2.74% but if I owned 7,000 shares my net profit would be $21,964.10 and the ROI of 10.66%

ftec2

Please bear in mind that returns on stocks involve risk and a 10% ROI in the positive today could be a -2% ROI tomorrow. It is important to understand the role time plays in the purchase and selling of stocks, as well as profits resulting from these transactions.

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