ROI Calculator
Evaluate the efficiency and profitability of your financial decisions.
Investment Duration (For Annualized ROI)
ROI Calculator
ROI (Return on Investment) is the simplest way to evaluate whether an investment was worth it — or to compare two opportunities. This calculator gives you the ROI percentage and annualized return in seconds.
What Is ROI?
Return on Investment measures the gain or loss on an investment relative to its cost. It's expressed as a percentage. A 25% ROI means you earned 25 cents for every dollar invested.
How to Use This Calculator
- Enter the initial investment amount (total cost, including fees).
- Enter the final value or total return received.
- Enter the holding period in years (for annualized ROI).
- Click Calculate to see ROI % and annualized ROI.
ROI Formulas
ROI = (Net Gain ÷ Cost of Investment) × 100
Net Gain = Final Value − Initial Investment
Annualized ROI = (1 + ROI)^(1/n) − 1 where n = years
Example Calculation
Bought stock for $8,000, sold for $11,500 after 3 years, received $600 in dividends.
- Net gain: ($11,500 + $600) − $8,000 = $4,100
- ROI: $4,100 ÷ $8,000 × 100 = 51.25%
- Annualized ROI: (1.5125)^(1/3) − 1 = 14.8% per year
What Is a Good ROI?
- Stocks: 7%–10% annualized (long-term average)
- Real estate: 8%–12% total return (rent + appreciation)
- Business investment: Varies widely; 15%+ is generally strong
- Savings account: 4%–5% currently (low risk, low return)
Common Mistakes to Avoid
- Ignoring fees and taxes — The true ROI is after all transaction costs, management fees, and capital gains taxes.
- Comparing ROI without considering time — A 50% ROI over 1 year is very different from 50% over 10 years. Always annualize for fair comparison.
- Not accounting for all costs — For real estate ROI, include maintenance, taxes, insurance, vacancy, and property management.
- Confusing ROI with CAGR for complex cash flows — For investments with multiple cash flows over time, use IRR instead.
Frequently Asked Questions
How is ROI different from profit margin?
ROI measures return relative to investment cost. Profit margin measures profit relative to revenue. ROI is used for evaluating investment efficiency; profit margin is for business performance.
Can ROI be negative?
Yes. If you lose money on an investment, ROI is negative. A $10,000 investment that returns $7,000 has an ROI of −30%.
Should I use ROI or NPV for business decisions?
ROI is simpler but doesn't account for time value of money. NPV and IRR are more rigorous for multi-year projects. Use ROI for quick comparisons and NPV/IRR for serious analysis. See our IRR Calculator.
What is social ROI?
Social ROI applies the same concept to non-financial outcomes — measuring social, environmental, or community value created per dollar invested. Used in nonprofit and impact investing analysis.
Conclusion
ROI is the universal language of investment performance. Use it to compare any two options, evaluate past decisions, or set a minimum target for future investments. Always annualize when comparing across different time periods.
Related: IRR Calculator | Investment Calculator | Average Return Calculator | Payback Period Calculator
Expert Tip
Always include transaction fees and taxes in your "Initial Cost" to get a realistic picture of your actual net return. An 8% ROI can easily become 5% after fees.
