ROI Calculator
Measure how much an investment earned relative to its cost, and turn it into a yearly rate so investments of different lengths can be compared.
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Return on investment (ROI) answers a simple question: for every dollar you put in, how much did you get back? It works for stocks, property, a marketing campaign, new equipment or a side business. This calculator gives the ROI, the profit and an annualized figure for comparing investments that ran for different lengths of time.
How to use the ROI calculator
- Enter the amount invested, including fees and other costs.
- Enter the amount returned: the final value plus any income such as dividends or rent, minus selling costs.
- Optionally enter the length of the investment in years to get the annualized ROI.
The ROI formula
ROI = (Amount returned − Amount invested) ÷ Amount invested × 100%
Annualized ROI = (Amount returned ÷ Amount invested)^(1 ÷ years) − 1The annualized version assumes the return compounded evenly each year. It is the same as the compound annual growth rate (CAGR).
Worked example
You invested $10,000 and three years later the investment, including all income, is worth $13,500.
- Net profit = 13,500 − 10,000 = $3,500
- ROI = 3,500 ÷ 10,000 = 35%
- Money multiple = 13,500 ÷ 10,000 = 1.35×
- Annualized ROI = 1.35^(1/3) − 1 ≈ 10.52% a year
Note that 35% ÷ 3 = 11.7% would overstate the yearly rate, because it ignores compounding.
Why annualizing matters
Two investments:
| Investment | Total ROI | Length | Annualized ROI |
|---|---|---|---|
| A | 50% | 5 years | 8.45% |
| B | 30% | 2 years | 14.02% |
A has the bigger total return, but B earned money much faster. If you could reinvest B’s proceeds at a similar rate, B is the better investment. Always compare investments of different lengths on an annualized basis.
Including costs correctly
Suppose you buy shares for $10,000, pay $500 in fees and sell for $12,000:
- Amount invested = 10,000 + 500 = $10,500
- ROI = (12,000 − 10,500) ÷ 10,500 ≈ 14.3%
Ignoring the fees would show 20%, which overstates your real return by more than five percentage points.
Limits of ROI
- It ignores risk. A 20% return from a volatile bet is not the same as 20% from a safe one.
- Timing of cash flows matters. If you added or withdrew money along the way, simple ROI can mislead. Use internal rate of return (IRR) or money-weighted return for those cases.
- Inflation reduces real returns. A 5% ROI during 3% inflation is only about a 2% gain in purchasing power.
- Opportunity cost is missing. A 4% return looks good until you compare it with what the same money could have earned elsewhere.
Tips
- Be consistent. When comparing projects, include the same kinds of costs in each.
- Use realistic final values. For assets you still hold, use what you could actually sell them for after costs.
- For marketing ROI, use the profit generated by a campaign, not just the revenue, as the amount returned.
- Revisit old decisions. Calculating the ROI of past projects, even roughly, shows which kinds of investment have actually paid off for you and sharpens future estimates.
Frequently asked questions
What is a good ROI?
It depends on the risk and the time involved. As a rough benchmark, broad stock markets have historically returned around 7–10% a year before inflation over long periods. A safe savings account earns less, and riskier investments should be expected to earn more.
What is the difference between ROI and annualized ROI?
ROI is the total return over the whole period. Annualized ROI spreads that return evenly over the years with compounding, giving a yearly rate. A 50% ROI over 5 years is only about 8.4% a year, while 30% over 2 years is about 14% a year.
Should I include fees and costs?
Yes. Add purchase fees, commissions, repairs and other costs to the amount invested, and subtract selling costs from the amount returned. Leaving them out makes the ROI look better than it really is.
Can ROI be negative?
Yes. If you get back less than you put in, the ROI is negative. Getting back nothing at all is an ROI of −100%.
Is annualized ROI the same as CAGR?
Yes. Annualized ROI calculated this way is the compound annual growth rate (CAGR) of the investment.