ROI Calculator

Return on Investment (ROI) is a financial metric used to evaluate the efficiency and profitability of an investment. It measures the return (profit or loss) relative to the investment's cost, expressed as a percentage. ROI is one of the most commonly used metrics in finance and helps investors compare the performance of different investments.

The basic ROI formula is: ROI = (Final Value - Initial Investment) / Initial Investment × 100%. This gives you the total return over the investment period as a percentage of your original investment.

Total ROI vs. Annualized ROI

Total ROI: Shows the overall return over the entire investment period, regardless of how long you held the investment. A 50% ROI over 1 year is very different from a 50% ROI over 10 years.

Annualized ROI: Converts the total return into an annual rate, making it easier to compare investments with different time periods. This accounts for the time value of money and provides a standardized way to evaluate performance. The formula accounts for compounding: Annualized ROI = [(Final Value / Initial Investment)^(1/Years) - 1] × 100%.

For example, if you invest $10,000 and it's worth $15,000 after 5 years, your total ROI is 50%, but your annualized ROI is approximately 8.45% per year. This annualized rate allows you to compare this investment to others that might have different time horizons.

Interpreting ROI Results

Positive ROI: Indicates a profitable investment. The higher the ROI, the better the investment performed relative to its cost.

Negative ROI: Indicates a loss. The investment is worth less than what you originally invested.

Zero ROI: Means you broke even - the investment is worth exactly what you paid for it.

When comparing investments, consider both total ROI and annualized ROI. A higher annualized ROI generally indicates better performance, especially when comparing investments with different time periods.

1. Enter your initial investment: This is the amount you originally invested, including any fees or commissions paid at purchase.
2. Enter the final value: This is the current value of your investment, including any returns, dividends, or capital gains. For ongoing investments, use the current market value.
3. Enter the time period: Enter the number of years (or fraction of years) you held the investment. For example, 6 months = 0.5 years, 18 months = 1.5 years.

The calculator will automatically compute your total ROI, annualized ROI, profit (or loss), and total return percentage. Results update in real-time as you change inputs.

Total ROI

This shows your overall return as a percentage of your initial investment. A 50% ROI means your investment is worth 50% more than what you originally paid. This doesn't account for the time period, so use it in conjunction with annualized ROI for a complete picture.

Annualized ROI

This converts your total return into an annual rate, making it easier to compare with other investments or benchmarks. This is particularly useful when comparing investments with different holding periods. A good annualized ROI depends on the investment type and risk level.

Profit/Loss

This is the dollar amount you gained or lost. It's simply the difference between your final value and initial investment. A positive number indicates profit, while a negative number indicates a loss.

Total Return

This shows your final value as a percentage of your initial investment. A 150% total return means your investment is worth 1.5 times what you originally paid. This is related to ROI: Total Return = ROI + 100%.

• Include all costs: When calculating initial investment, include purchase fees, commissions, and other costs. For final value, subtract any selling fees or commissions.
• Consider taxes: ROI calculations don't account for taxes. Your after-tax return may be significantly different, especially for short-term investments subject to higher tax rates.
• Compare to benchmarks: A 10% annualized ROI might be excellent for bonds but poor for stocks. Compare your ROI to relevant benchmarks like market indices or similar investments.
• Account for inflation: ROI doesn't account for inflation. A 5% ROI in a year with 3% inflation means a real return of only 2%. Consider inflation-adjusted returns for long-term investments.
• Use for comparison: ROI is most useful when comparing different investment options. Use annualized ROI to compare investments with different time periods.
• Consider risk: Higher ROI often comes with higher risk. Don't just chase the highest ROI - consider your risk tolerance and investment goals.