ROI Calculator
Calculate Return on Investment for business and personal investments. Determine your ROI percentage, annualized returns, and total gains.
ROI Formulas
Basic ROI
Net Gain
Annualized ROI
What is Return on Investment (ROI)?
Return on Investment (ROI) is a key performance metric used to evaluate the efficiency and profitability of an investment. It measures the return generated relative to the investment's cost, expressed as a percentage.
ROI is widely used by investors, business owners, and financial analysts to compare the profitability of different investments and make informed decisions about where to allocate resources.
Performance Measurement
Track how well your investments are performing over time
Investment Comparison
Compare different investment opportunities objectively
Decision Making
Make data-driven investment decisions with confidence
How to Calculate ROI
Basic ROI Calculation
Record the total amount of money you invested initially, including any fees or costs.
Calculate the current or final value of your investment, including any dividends or income received.
Subtract the initial investment from the final value, divide by the initial investment, and multiply by 100 to get your ROI percentage.
Understanding Annualized ROI
Annualized ROI normalizes returns to a yearly basis, making it easier to compare investments with different time horizons. A 50% return over 5 years is very different from a 50% return over 1 year.
The annualized ROI formula uses the geometric mean to account for compound growth, providing a more accurate picture of your investment's yearly performance.
ROI Examples
Common Investment Scenarios
Buy a property for $200,000, sell for $250,000 after 3 years. ROI = 25%, Annualized ROI ≈ 7.7%
Invest $10,000 in stocks, value grows to $15,000 over 2 years. ROI = 50%, Annualized ROI ≈ 22.5%
Invest $50,000 in a business, receive $65,000 back after 18 months. ROI = 30%, Annualized ROI = 20%
Limitations of ROI
While ROI is a valuable metric, it has limitations. It doesn't account for the time value of money (unless annualized), risk factors, or opportunity costs. Two investments with the same ROI may have very different risk profiles.
For a more comprehensive analysis, consider using additional metrics like Net Present Value (NPV), Internal Rate of Return (IRR), or risk-adjusted return measures like the Sharpe Ratio.
Tips for Better ROI Analysis
Always include all costs in your initial investment calculation, including transaction fees, maintenance costs, and taxes. Forgetting hidden costs can lead to an inflated ROI figure.
When comparing investments, use annualized ROI for accurate comparisons across different time periods. Also consider the liquidity, risk, and your investment goals when making decisions.
Pro Tips
- Bookmark this calculator for quick access in the future
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- Try different scenarios to compare outcomes
- Check out our related calculators for more insights
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