ROI Calculator
Calculate Return on Investment (ROI) — total return, annualized return, and net profit from an initial investment, final value, and holding period. Works for stocks, real estate, business projects, and any investment with a defined entry and exit.
What Is Return on Investment?
Return on Investment (ROI) measures the profitability of an investment relative to its cost. It answers a simple question: for every dollar invested, how much did you make (or lose) in return?
ROI is the most widely used profitability metric because it works for any investment — stocks, bonds, real estate, a new factory, a marketing campaign, or a small business. But simple ROI ignores time: a 50% return over 1 year is very different from a 50% return over 20 years. That is why annualized ROI matters.
ROI Formulas
Total ROI:
ROI = ((Final Value − Initial Investment) ÷ Initial Investment) × 100
Annualized ROI (compound annual growth rate):
Annualized ROI = ((Final Value ÷ Initial Investment)^(1 ÷ Years) − 1) × 100
Simple annualized ROI (arithmetic, for comparison):
Simple Annual ROI = Total ROI ÷ Years
The compound annualized ROI is the accurate figure — it is the steady annual rate that would have produced the same total return. The simple version is easier to compute but overstates long-term returns.
Worked Example
You invest $10,000 and it grows to $15,000 after 3 years:
Net profit = $15,000 − $10,000 = $5,000
Total ROI = ($5,000 ÷ $10,000) × 100 = 50%
Annualized ROI = (($15,000 ÷ $10,000)^(1÷3) − 1) × 100 = 14.47%
Investment multiple = $15,000 ÷ $10,000 = 1.50×
Interpretation: your money grew at an equivalent rate of 14.47% per year — well above the historical stock market average of ~10%.
How to Interpret ROI
- Above 15% annualized (Excellent) — outperforming the long-term stock market average. Strong returns.
- 10–15% annualized (Good) — in line with or above historical stock returns.
- 5–10% annualized (Average) — below stock market average but above savings accounts.
- 0–5% annualized (Weak) — barely beating inflation. Better alternatives may exist.
- Negative ROI — you lost money. Reassess the investment.
Frequently Asked Questions
What is a good ROI?
It depends on the asset class and risk. Historical stock market returns average about 10% per year (7% after inflation). Real estate returns 6–10% annually. Bonds return 3–5%. Any investment returning more than 10% annualized is above average. Any investment returning more than 20% annualized is excellent — but check whether it is sustainable or reflects higher risk.
What is the difference between ROI and annualized ROI?
Total ROI is the raw percentage gain over the entire holding period. Annualized ROI converts that to a compound annual rate. A 50% total return over 3 years equals about 14.47% annualized — but the same 50% over 10 years is only 4.14% annualized. Annualized ROI makes investments of different durations directly comparable.
What is the difference between ROI and IRR?
ROI measures the total return relative to the initial investment. IRR (Internal Rate of Return) is a more sophisticated metric that accounts for multiple cash flows occurring at different times. ROI is simple and useful for one-time investments; IRR is necessary when money is added or withdrawn during the investment period.
Does ROI include fees and taxes?
Simple ROI does not — it only compares initial investment to final value. For a realistic net ROI, subtract fees and taxes from the final value before calculating. For example, if you invested $10,000, sold for $15,000, but paid $200 in fees and $800 in taxes, your net final value is $14,000 and net ROI is 40%, not 50%.
Can ROI be negative?
Yes. A negative ROI means you lost money — the final value is lower than the initial investment. A −20% ROI means you lost 20% of what you invested. A −100% ROI means total loss. Negative ROI is a signal to reassess the investment strategy or cut losses.
Why is annualized ROI better than simple ROI?
Simple ROI ignores time. A 50% return sounds the same whether it took 1 year or 20 years — but the 1-year return is dramatically better. Annualized ROI converts every investment to its equivalent per-year compound return, which makes different durations directly comparable. Always use annualized ROI when comparing investments with different holding periods.