ROI Calculator — Return on Investment
Calculate the return on investment (ROI) for any investment. Enter your initial investment and final value to see your total and annualized returns. See also Compound Interest Calculator and CAGR Calculator.
How to Calculate ROI
Return on Investment (ROI) measures the profitability of an investment relative to its cost. To calculate ROI, subtract the initial investment from the final value, then divide by the initial investment and multiply by 100. A positive ROI means you made money; a negative ROI means you lost money. If you know the time period, you can also calculate the annualized ROI using the CAGR formula, which accounts for the compounding effect over multiple years.
ROI Formula
ROI = ((Final Value − Initial Investment) / Initial Investment) × 100
Annualized ROI:
Annualized ROI = ((Final Value / Initial Investment)^(1/years) − 1) × 100
Where:
Final Value = ending value of the investment
Initial Investment = amount originally invested
years = holding period in years
Example Calculation
Initial Investment: $10,000
Final Value: $15,000
Time Period: 3 years
ROI = (15,000 − 10,000) / 10,000 × 100 = 50%
Annualized ROI = (15,000 / 10,000)^(1/3) − 1 = 14.47%
Total Gain: $5,000
Gain per Year: $1,666.67
ROI Reference Table
| Investment | Final Value | Years | ROI | Annualized |
|---|---|---|---|---|
| $10,000 | $12,000 | 1 | 20.00% | 20.00% |
| $10,000 | $15,000 | 3 | 50.00% | 14.47% |
| $10,000 | $20,000 | 5 | 100.00% | 14.87% |
| $25,000 | $40,000 | 7 | 60.00% | 6.96% |
| $50,000 | $100,000 | 10 | 100.00% | 7.18% |
| $5,000 | $3,500 | 2 | -30.00% | -16.33% |
Frequently Asked Questions
What is a good ROI?
A "good" ROI depends on the investment type and risk. The S&P 500 has historically returned about 10% annually. Real estate typically returns 8-12%. A higher-risk investment should offer a higher potential ROI to compensate for the risk.
What is the difference between ROI and annualized ROI?
ROI measures the total return over the entire period. Annualized ROI converts that to an equivalent yearly rate, making it easier to compare investments held for different lengths of time. A 50% ROI over 5 years is very different from 50% over 1 year.
Does ROI account for inflation?
No, standard ROI is a nominal return. To get the real (inflation-adjusted) ROI, subtract the inflation rate from your annualized ROI. For example, a 10% nominal return with 3% inflation gives approximately 7% real return.
Can ROI be negative?
Yes. A negative ROI means you lost money on the investment. If your final value is less than your initial investment, the ROI will be negative, indicating a loss.
Solved Examples
Example 1: Stock investment ROI
Solution:
You bought 100 shares at $45/share = $4,500 invested
Sold after 3 years at $72/share = $7,200 final value
ROI = (Final Value - Investment) / Investment × 100
ROI = ($7,200 - $4,500) / $4,500 × 100 = 60%
Annualized ROI = ((7200/4500)^(1/3) - 1) × 100 = 16.96%
Answer: 60% total ROI, or 16.96% annualized over 3 years.
Example 2: Real estate rental property ROI
Solution:
Purchase price = $250,000, Annual rental income = $24,000
Annual expenses (taxes, maintenance, insurance) = $8,000
Net annual income = $24,000 - $8,000 = $16,000
Annual ROI = $16,000 / $250,000 × 100 = 6.4%
Answer: 6.4% annual ROI from rental income alone (not including appreciation).
Example 3: Marketing campaign ROI
Solution:
Campaign cost = $15,000, Revenue generated = $52,000
ROI = ($52,000 - $15,000) / $15,000 × 100
ROI = $37,000 / $15,000 × 100 = 246.67%
Answer: The campaign returned 246.67% ROI — every $1 spent generated $3.47 in revenue.
Practice Questions
Try these on your own:
- You invest $10,000 in a mutual fund. After 5 years it's worth $16,500. What is your total ROI? (Answer: 65%)
- A business spends $50,000 on equipment that generates $12,000/year in savings. What is the annual ROI? (Answer: 24%)
- You buy a stock at $80 and sell at $65. What is your ROI? (Answer: -18.75%)
- An investment doubles in 6 years. What is the annualized ROI? (Answer: 12.25%)
- You invest $30,000 and receive $3,600/year in dividends. What is your annual yield ROI? (Answer: 12%)
Common Mistakes to Avoid
A common error is comparing ROI across different time periods without annualizing. A 50% ROI over 10 years (4.14% annualized) is worse than a 30% ROI over 3 years (9.14% annualized). Another mistake is ignoring costs — when calculating real estate ROI, you must include closing costs, maintenance, taxes, and insurance, not just the purchase price. People also frequently confuse ROI with profit margin. ROI measures return relative to investment cost, while margin measures profit relative to revenue. Finally, forgetting to account for opportunity cost can lead to poor decisions — a 5% ROI may seem positive, but if a risk-free savings account offers 4.5%, the extra 0.5% may not justify the risk.
Key Takeaways
- ROI = (Gain from Investment - Cost of Investment) / Cost of Investment × 100%.
- Always annualize ROI when comparing investments with different time horizons.
- Include ALL costs (fees, taxes, maintenance) in your investment cost for accurate ROI.
- A negative ROI means you lost money — not all investments are profitable.
- ROI doesn't account for risk; higher ROI often comes with higher risk.
- Compare ROI against benchmarks: S&P 500 averages ~10% annually, risk-free rate is ~4-5%.