ROI Calculator
Calculate the return on investment (ROI) for any investment. Enter your initial cost and final value to see total ROI, annualized return, and profit.
Disclaimer: This calculator is provided for informational and educational purposes only. It does not constitute financial, tax, or professional advice.
What is ROI?
Return on Investment (ROI) is a measure of the profitability of an investment. It expresses the gain or loss as a percentage of the original cost, making it easy to compare different investments.
ROI is one of the most widely used metrics in finance because it is simple to calculate and understand. However, it does have limitations — particularly that it doesn't account for the time held, unless you use annualized ROI.
How to calculate ROI
The basic ROI formula is:
ROI = (Final Value − Initial Cost) ÷ Initial Cost × 100
For example, if you invest $1,000 and sell for $1,500: ROI = ($1,500 − $1,000) ÷ $1,000 × 100 = 50%
To calculate annualized ROI:
Annualized ROI = ((Final Value ÷ Initial Cost) ^ (1 ÷ years)) − 1
For example, if the $1,000 investment grew to $1,500 over 3 years: Annualized ROI = ((1,500 ÷ 1,000) ^ (1/3)) − 1 = 14.5% per year
ROI vs other metrics
While ROI is useful, it has limitations. Other metrics to consider:
- **IRR (Internal Rate of Return)**: Accounts for the timing of cash flows, not just start and end values.
- **NPV (Net Present Value)**: Discounts future cash flows to present value using a discount rate.
- **CAGR (Compound Annual Growth Rate)**: Similar to annualized ROI but assumes steady growth.
- **Payback Period**: How long it takes to recover the initial investment.
For real estate, stocks, or business investments with multiple cash flows, IRR or NPV may be more appropriate than simple ROI.
Frequently Asked Questions
What is a good ROI?
A "good" ROI depends on the investment type and risk. Stock market average is ~7-10% per year. Real estate typically targets 8-12%. A business investment might need 15-25% to justify the risk.
How is ROI different from profit?
Profit is the dollar amount gained (e.g., $500). ROI is the percentage return (e.g., 50%). ROI allows comparison between investments of different sizes.
Does ROI account for time?
Basic ROI does not. A 50% return over 1 year is very different from 50% over 10 years. Use annualized ROI to compare investments held for different periods.
Can ROI be negative?
Yes. If the final value is less than the initial cost, ROI is negative. For example, investing $1,000 and selling for $800 gives an ROI of -20%.
How do I calculate ROI with multiple investments?
Use the total of all investments as the initial cost, and the current total value as the final value. Or use IRR for more accurate results with timed cash flows.