ROI Calculator
Return on investment (ROI) is the single most-quoted number in finance — but a raw ROI of 50% means very different things over 1 year versus 10. This calculator gives you both: the total ROI and, when you add a holding period, the annualized ROI (CAGR), which is the only fair way to compare investments held for different lengths of time.
When to use this calculator
- Measuring the total return on a stock, fund, or property sale
- Comparing investments held for different lengths of time via annualized ROI
- Evaluating a marketing or business spend against the revenue it produced
- Checking whether a side investment beat a simple index fund
- Translating a multi-year gain into a per-year rate
- Sanity-checking a 'double your money' claim against the time it took
How it works
1 min readWhat is an ROI calculator?
It measures how much an investment gained or lost relative to its cost. Total ROI is the net profit as a percentage of the initial investment. Annualized ROI (compound annual growth rate, CAGR) restates that as an equivalent steady yearly rate, so investments held for different periods can be compared fairly.
How It Works
Enter what you put in and what it's now worth (or what it returned). The calculator subtracts to get net profit, divides by the initial investment for total ROI, and — if you provide a holding period — computes the annualized rate.
Formula
netProfit = finalValue - initialInvestment
ROI = netProfit / initialInvestment * 100
// Annualized (CAGR), when years > 0:
annualized = ((finalValue / initialInvestment)^(1/years) - 1) * 100Worked Example
$1,000 grows to $1,500 over 2 years:
| Metric | Calculation | Result |
|---|---|---|
| Net profit | $1,500 − $1,000 | $500.00 |
| Total ROI | $500 / $1,000 | 50.00% |
| Annualized (CAGR) | (1.5)^(1/2) − 1 | ~22.47%/yr |
Note that 50% over 2 years is not 25%/year — compounding makes the annualized figure 22.47%.
Limitations
Frequently asked questions
How do I calculate ROI?
ROI = (final value − initial investment) / initial investment × 100. If you invested $1,000 and it's now worth $1,500, ROI = $500 / $1,000 = 50%. This calculator also shows net profit and annualized ROI.
What is annualized ROI (CAGR)?
Annualized ROI, or compound annual growth rate, is the steady yearly rate that would turn your initial investment into the final value over the holding period. It's calculated as (final/initial)^(1/years) − 1, and it's the fair way to compare investments held for different lengths of time.
Why isn't 50% over 2 years just 25% per year?
Because returns compound. Earning 22.47% in year one and again in year two turns $1,000 into $1,500 (1.2247² ≈ 1.5). A simple 25% + 25% would overstate the result. The annualized figure (22.47%) accounts for compounding.
What is a good ROI?
It depends on risk and time. As a benchmark, the US stock market has averaged roughly 7–10% annualized over the long run. A good ROI beats a comparable low-risk alternative after fees, taxes, and inflation. Always compare on an annualized basis.
What's the difference between ROI and profit?
Profit is the dollar gain (final − initial). ROI expresses that gain as a percentage of what you invested, so you can compare investments of different sizes. $500 profit is 50% ROI on $1,000 but only 5% on $10,000.
Does ROI account for inflation?
No, basic ROI is a nominal figure. To get real ROI, subtract the inflation rate over the period (approximately) or deflate the final value to today's dollars. A 50% nominal return over a high-inflation stretch can be much smaller in real terms.
Can ROI be negative?
Yes. If the final value is below the initial investment, ROI is negative — a loss. Turning $1,000 into $800 is a −20% ROI (−$200 net). The calculator shows the sign and labels it a net loss.
How do I include fees and taxes in ROI?
Add purchase costs and fees to your initial investment, and subtract selling fees and taxes from the final value, before calculating. This gives a net ROI that reflects what you actually kept.