ROI Calculator
Calculate return on investment (ROI), net profit and annualized ROI (CAGR) over your holding period.
ROI Results
Why plain ROI is easy to mislead yourself with
Return on investment is gain divided by cost: make $3,000 on a $10,000 outlay and you have a 30% return. It is the most quoted investment figure there is, and its simplicity hides the thing that matters most — ROI contains no sense of time. A 30% return is excellent over one year and poor over ten, yet both report as 30%.
That is what annualised return exists to fix. Converting to a yearly rate makes returns comparable: 30% over one year is 30% a year, while 30% over ten years is about 2.7% a year, which loses to inflation. Whenever you are comparing two opportunities of different durations, annualise first, or you are not comparing anything meaningful.
Two more omissions are worth naming. Plain ROI ignores costs beyond the headline purchase — fees, taxes, maintenance, and the time you personally put in. And it ignoresopportunity cost: a 6% return is only good if the alternative was worse. Against a broad index averaging around 10% historically, a 6% project is a loss dressed as a gain. For investments with money moving in and out over time, IRR handles the timing that ROI cannot.
Frequently asked questions
How to calculate Return on Investment (ROI)?
ROI Percentage = ((Final Value - Initial Investment) / Initial Investment) × 100.
How is return on investment calculated?
(Gain - cost) / cost x 100. An investment of $10,000 returning $13,000 gives a 30% ROI. Its virtue is simplicity; its flaw is that it ignores time entirely - 30% over one year and 30% over ten are very different outcomes shown as the same number.
What is annualised ROI?
It converts total return into a per-year rate so that investments over different periods can be compared: ((final / initial)^(1/years)) - 1. A 30% total return over three years is about 9.1% annualised. Always annualise before comparing.
What does ROI leave out?
Risk, liquidity, taxes, transaction costs and the effort involved. Two investments with identical ROI are not equivalent if one is a government bond and the other a speculative venture. ROI is a starting measure, not a ranking.