How to use the ROI Calculator
- Enter the amount you invested, including any fees you paid.
- Enter the final value, including any income received, such as dividends or rent.
- Enter how long you held the investment, in years.
- Read the ROI, the net gain and the annualised ROI.
Formula used
ROI = (final value − cost) ÷ cost × 100. Annualised ROI = ((final ÷ cost)^(1 ÷ years) − 1) × 100.
Worked example
Here is the ROI Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Amount invested | $10,000 |
| Final value | $14,500 |
| Time held | 3 years |
| Result | |
| ROI | 45% |
| Net gain or loss | $4,500 |
| Annualised ROI | 13.19% |
The same gain over different holding times
The default cost and final value, with only the time changed.
| Time held | ROI | Annualised ROI |
|---|---|---|
| 1 years | 45% | 45% |
| 2 years | 45% | 20.42% |
| 3 years | 45% | 13.19% |
| 5 years | 45% | 7.71% |
| 10 years | 45% | 3.79% |
The ROI formula
ROI = (final value − cost) ÷ cost × 100. If you invested $10,000 and it became $14,500, the gain is $4,500 and the ROI is 45%.
ROI alone ignores time. A 45% return in one year is excellent; the same 45% over ten years is not. The annualised ROI fixes this by finding the yearly rate that would give the same result: ((final ÷ cost)^(1 ÷ years) − 1) × 100. Over 3 years the 45% ROI is 13.19% a year.
Why the annualised figure matters
Holding the same gain for different times gives very different yearly returns: 45% a year over 1 year, 20.4% over 2, 7.7% over 5 and 3.8% over 10.
When you compare investments, compare annualised returns. It puts a 6-month trade and a 10-year holding on the same scale.
Include all costs and income
For a fair ROI, count every cost: purchase price, fees, commissions, taxes and any upkeep. Also count all income you received, such as dividends, interest or rent, in the final value. A property that looks like a 40% gain can be much less after agent fees, repairs and taxes.
ROI also does not measure risk. Two investments with the same ROI can have very different chances of loss.
Losses and negative ROI
A loss gives a negative ROI. With $10,000 falling to $8,000, ROI is -20%. Note that recovering from a loss needs a larger gain: after a 20% loss, you need a 25% gain to get back to even.
This asymmetry is one reason investors care about avoiding large losses.
Putting ROI in context
A return only means something compared with the alternatives and with inflation. The default example earns 45% over three years, or 13.2% a year. If inflation averages 3%, the real return is about (1.1319 ÷ 1.03) − 1 = 9.9% a year, which is what you gained in buying power. Compare the annualised figure with what a safe savings account or an index fund would have paid for the same period.
ROI also says nothing about risk or timing. An investment that doubled and then halved can look fine at the end, and a high ROI from one lucky year is not a forecast. For projects and businesses, include every cost and the time value of money, and consider whether the money could have been used elsewhere.
Frequently asked questions
What is a good ROI?
It depends on the risk and the time. Compare the annualised figure with alternatives, such as a savings rate or an index fund.
Does ROI include fees and taxes?
Only if you include them. Add fees to the cost and subtract them from the final value for an after-cost result.
What is annualised ROI?
The yearly rate of return that would give the same total result over the holding time.
Can ROI be negative?
Yes. A loss gives a negative ROI.
Is ROI the same as profit?
No. Profit is the amount gained. ROI is the gain as a percentage of the amount invested.
How is ROI different from CAGR?
ROI is the total return. CAGR is the same return expressed as a yearly rate. The annualised ROI here equals CAGR.
How do I adjust ROI for inflation?
Divide (1 + annual return) by (1 + inflation rate) and subtract 1. A 13.2% return with 3% inflation is about a 9.9% real return.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.