ROI Calculator

What ROI measures

Return on investment (ROI) tells you how much you gained or lost compared with what you put in, as a percentage. It is the simplest way to compare a stock, a rental property, a marketing campaign or a new machine for a workshop: every one of them costs money up front and, hopefully, returns more later.

ROI = (final value − amount invested) ÷ amount invested × 100%
Annualized ROI = (final value ÷ amount invested)^{1 ÷ years} − 1

The first formula gives the total return over the whole period. The second turns it into an equivalent yearly rate, also called the compound annual growth rate (CAGR). Use the annualized figure whenever you compare investments that lasted different lengths of time.

Worked examples

The examples show why the period matters. A 25% return over two years (11.8% a year) is a weaker result than 60% over four years (12.5% a year), even though 25% sounds better than "only" 11.8%. Doubling your money sounds impressive, but over five years it works out at under 15% a year.

Short periods inflate annualized returns

Annualizing assumes the same rate could be repeated year after year. A 20% gain in six months annualizes to 44%, because 1.2 × 1.2 = 1.44. That is mathematically correct, but a lucky few months rarely repeat. Treat annualized figures for periods shorter than a year with caution, and prefer the plain ROI when you only want to know what actually happened.

What to include in "amount invested"

ROI is only as honest as the numbers you put in. Include everything you paid to make the investment and to get the money back out:

• Purchase costs: fees, commissions, taxes on purchase, delivery and installation.
• Running costs that you paid separately: maintenance, insurance, subscriptions, repairs.
• Selling costs: agent fees and transaction charges, which reduce the final value.

On the other side, add any income received during the period, such as dividends, interest or rent, to the final value. A rental flat bought for 100,000 with 5,000 in fees, sold for 115,000 after collecting 12,000 in net rent, has an amount invested of 105,000 and a final value of 127,000: an ROI of about 21%.

ROI for business projects

Companies use the same formula for projects: the "amount invested" is the project cost, and the "final value" is the money saved or earned because of it. If new software costs 8,000 a year and saves staff time worth 12,000, the yearly ROI is (12,000 − 8,000) ÷ 8,000 = 50%. The hard part is estimating the benefit honestly; a conservative estimate that turns out right is more useful than an optimistic one that does not.

Limits of ROI

• It ignores risk. A 10% return from a government bond and a 10% return from a single small company are not equally good.
• It ignores the timing of cash flows in the middle of the period. For investments with many deposits and withdrawals, money-weighted measures such as IRR are more accurate.
• It ignores inflation. A 3% yearly return during 3% inflation leaves your purchasing power unchanged. Subtract inflation from the annualized ROI for a rough real return.
• Taxes on gains and income reduce what you actually keep.

Common mistakes

• Dividing by the final value instead of the amount invested. Going from 100 to 150 is a 50% gain, not 33%.
• Comparing total ROI across different periods without annualizing.
• Averaging yearly returns. +50% followed by −50% is not 0%: 100 becomes 150, then 75, a 25% loss. The annualized formula avoids this trap.
• Forgetting fees, which can turn a small paper gain into a loss.

This calculator is for general information and education. It does not account for taxes, risk or inflation, and it is not investment advice.

Frequently asked questions

Sources

• Investor.gov (U.S. Securities and Exchange Commission), Compound interest and investment returns.
• CFA Institute, Return measures: holding period return and annualized return.

Last reviewed 7 October 2026. Results are estimates; see our disclaimer.