There are different methods investors can use to calculate the potential and actual returns of their investments. Two commonly used methods are the calculation of the internal rate of return (IRR) and the return on investment (ROI).

It’s important to ensure that when you are considering the performance of an investment, you reflect on both the target and actual IRR. For example, what exactly does it mean when you say that a particular investment has earned a 12.63% IRR? And what does it mean if you said you earned a 20% ROI over five years? In the article below, we will compare IRR vs. ROI and break down what can be confusing concepts. We’ll also illustrate how to interpret IRR vs. ROI when doing your own personal due diligence on potential investments.
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You can continue reading the full article on IRR and ROI here.