Mark made two smart investments three years ago. One, he invested $400 in a rare coin and just sold it for $1000, and two, he bought one share in company A for $100, collected $30 in dividends, and just sold that share for $250. For the sake of simplicity, we'll assume there were no commissions or other fees involved. To quantify his success, we could simply calculate the profit in each case. So, one, we subtract the $400 cost from the $1000 price he sold at, and realized he made a $600 profit on his coin.
Two, We subtract the $100 cost from the $250 he got when selling plus $30 through dividends. After drawing the line, he made a $180 profit on his share. Was the coin a better investment because he made more money?
Well... let's not forget that he also paid more for it. To also account for that, we calculate the so-called return on investment, or ROI, by dividing the profit by the amount which was invested. In other words, 1 for the gold coin, his ROI was 600 divided by 400, or 150%. 2 for the share, his ROI was 180 divided by 100, so 180%, which is better than the gold coin ROI.
Please understand that each method has its limitations, including ROI, because, for example, it doesn't factor in how long you held an investment. An 80% ROI might be great if you held for 3 years, but awful if you had to wait 30 years. Always understand what and why you're measuring.