Whenever someone quotes an ROI, you should know how they arrived at their calculation. As we said above, ROI is fairly straightforward if you’re assuming that a stock is purchased and the amount of money you put in is not adjusted in any way. Even if that does happen, investors need to account for any transaction fees both when they purchased it and again when they sell it.
A quick example can explain this:
If you purchased stock for $250 and later sold that same stock for $750, you might say that you got an ROI of 200%. But if you had to pay a $20 transaction fee when you bought the stock and another $20 transaction fee when you sold it,  the true ROI of this investment would be 184%.
Real estate investments are another example of investments where it can be easy to misstate ROI. This is because many investors think that the return on investment is created by subtracting the purchase price from the selling price and dividing by the purchase price. However, that calculation does not take into account the other costs that go into owning or renting the home. For rental properties, an investor might easily think about the things like how much the property has increased in value or the income they receive on the asset side, but not factor in their expenses like taxes, insurance, and all the maintenance costs they’ve put in over the years.