ROI Calculator

Calculate return on investment (ROI) and annualized returns. Measure the efficiency of your investments and compare opportunities across different time periods.

Investment Details

$

Amount originally invested

$

Current or sale value

yrs

How long the investment was held

Enter your investment details and click "Calculate" to determine your return on investment.

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Pro Tip

Always use annualized ROI (CAGR) when comparing investments of different durations. A 100% return over 10 years (7.2% CAGR) is actually worse than a 50% return over 3 years (14.5% CAGR).

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Understanding Return on Investment

Return on Investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment. It directly measures the amount of return relative to the investment's cost, expressed as a percentage.

While basic ROI is simple to calculate, it does not account for the time period of the investment. An investment that returns 50% over 5 years is fundamentally different from one that returns 50% in 1 year. This is why annualized ROI is important for fair comparisons.

Annualized ROI (also called Compound Annual Growth Rate or CAGR) converts the total return into an equivalent annual rate, allowing you to compare investments of different durations on an equal basis. This is the standard way financial professionals compare performance.

Keep in mind that ROI calculations typically do not include external factors like taxes, fees, inflation, or risk. A higher ROI does not always mean a better investment if it comes with significantly more risk or hidden costs.

ROI Formulas

ROI = (Final Value − Initial Investment) / Initial Investment × 100

Where:

ROI = Return on investment (percentage)

Final Value = Current or sale value of investment

Initial Investment = Original cost of investment

Example

$10,000 invested, now worth $15,000 after 3 years:

  • • Total gain: $15,000 - $10,000 = $5,000
  • • ROI: $5,000 / $10,000 x 100 = 50%
  • • Annualized ROI: (15,000/10,000)^(1/3) - 1 = 14.47%
  • • This means 14.47% average growth per year, compounded

Frequently Asked Questions

What is a good ROI?
It depends on the investment type and risk. The stock market historically returns about 10% annually. Real estate often yields 8-12%. Anything above the risk-free rate (Treasury yields, around 4-5%) provides positive real returns. Higher-risk investments should provide higher expected returns.
What is the difference between ROI and CAGR?
ROI shows the total return as a percentage regardless of time. CAGR (annualized ROI) shows the equivalent annual growth rate, accounting for compounding. CAGR is better for comparing investments held for different time periods.
Does ROI account for risk?
No, basic ROI does not factor in risk. A 20% ROI from a speculative crypto investment is fundamentally different from a 20% ROI from a diversified index fund. Risk-adjusted returns (Sharpe ratio) provide a more complete picture.
Should I include fees and taxes in my ROI calculation?
For the most accurate picture, yes. Net ROI (after fees, commissions, and taxes) reflects your actual return. However, gross ROI is useful for comparing the investment opportunity itself.