ROI Calculator: How to Calculate Return on Investment

ROI (return on investment) measures profit relative to what you put in. The formula is ROI = (final value − initial investment) ÷ initial investment × 100, so $1,000 that grows to $1,500 has an ROI of 50%.

Plain ROI ignores how long the money was tied up, which makes it hard to compare investments held for different periods. Our free ROI calculator shows both the total ROI and the annualized ROI, the yearly growth rate that would produce the same result. This guide explains both formulas with worked examples and the costs people forget to count.

The ROI formula

Profit = Final value − Initial investment
ROI %  = Profit ÷ Initial investment × 100

For a $1,000 investment that is worth $1,500 when you sell:

1. Profit: 1,500 − 1,000 = $500.
2. ROI: 500 ÷ 1,000 × 100 = 50%.

A negative ROI means a loss. $10,000 that falls to $8,500 has an ROI of −15%.

Annualized ROI: why time matters

A 50% return is excellent over one year and modest over ten. Annualized ROI converts any total return into a yearly rate that compounds, so you can compare investments fairly:

Annualized ROI = ((Final value ÷ Initial investment)^(1 ÷ Years) − 1) × 100

This is the same calculation as CAGR, the compound annual growth rate. Here is the same 50% total return spread over different periods:

$1,000 grows to $1,500 over	Total ROI	Annualized ROI
1 year	50%	50.00%
3 years	50%	14.47%
5 years	50%	8.45%
10 years	50%	4.14%

Worked example: comparing two investments

Investment A turns $5,000 into $6,500 in 2 years. Investment B turns $5,000 into $8,000 in 6 years. B has the bigger total return, but A grew faster.

1. A's growth multiple: 6,500 ÷ 5,000 = 1.30. Total ROI: 30%.
2. A's annualized ROI: 1.30^1/2 − 1 = 0.1402, or 14.02% a year.
3. B's growth multiple: 8,000 ÷ 5,000 = 1.60. Total ROI: 60%.
4. B's annualized ROI: 1.60^1/6 − 1 = 0.0815, or 8.15% a year.

If you could reinvest A's proceeds at a similar rate, A is the stronger performer. Total ROI alone would have pointed you the wrong way.

What to include when calculating ROI

ROI is only as accurate as the numbers you feed it. The final value should reflect everything you got back, and the initial investment everything you put in.

• Add to the final value: dividends, interest, rent or other income received while you held the investment.
• Add to the cost: purchase fees, commissions, closing costs, repairs, maintenance and interest paid on any borrowed money.
• Subtract taxes if you want an after-tax ROI, since that is the money you actually keep.

For marketing and business projects, use profit, not revenue. If a $2,000 campaign brings in $5,000 of sales that carry $3,000 of gross profit, the ROI is (3,000 − 2,000) ÷ 2,000 = 50%. Using revenue would suggest 150% and overstate the result.

How to use the ROI calculator

1. Open the ROI calculator.
2. Enter the Initial Investment, the total amount you put in. It must be above zero and works in any currency.
3. Enter the Final Value, what the investment is worth now or what you received when you sold. A lower number records a loss.
4. Set the Investment Period with the slider, from 1 to 30 years, or tap a preset: 1, 3, 5, 10 or 20 years.
5. Read the results: Annualized ROI (compounded annually) at the top, then Profit / Loss in currency and total ROI as a percentage.

The period works in whole years. For a holding of a few months, the total ROI is still accurate; just ignore the annualized figure.

Common ROI mistakes

• Comparing total ROI across different time periods. Always compare annualized figures.
• Ignoring inflation. A 3% yearly return during 3% inflation leaves your buying power flat. Read how inflation affects your money and measure it with the inflation calculator.
• Using ROI for regular contributions. The formula assumes one lump sum. If you added money along the way, the ROI will be overstated. Project steady monthly saving with the compound interest calculator instead, and see how compound interest works.
• Ignoring risk. Two investments with the same expected ROI can carry very different chances of loss. ROI measures outcome, not safety.

For quick checks, the Percentage Change panel of the percentage calculator gives the same result as total ROI. All results are estimates for comparison, not investment advice.

Frequently asked questions

How do you calculate ROI?

Subtract the initial investment from the final value, divide by the initial investment and multiply by 100. $1,000 that grows to $1,500 has an ROI of 500 ÷ 1,000 × 100 = 50%.

What is annualized ROI?

Annualized ROI is the yearly compound growth rate that turns the initial investment into the final value over the holding period. A 50% total return over 3 years is an annualized ROI of 14.47%.

What is a good ROI?

There is no single number. A good ROI beats what you could earn elsewhere at a similar level of risk over the same period, after fees, taxes and inflation.

Can ROI be negative?

Yes. A negative ROI means the investment lost money. $10,000 that falls to $8,500 over 2 years has an ROI of −15%, or about −7.80% a year.

What is the difference between ROI and CAGR?

ROI is the total percentage gain or loss over the whole holding period. CAGR, the compound annual growth rate, spreads that gain into an equal yearly rate, which is the same as annualized ROI.

Is ROI the same as profit?

No. Profit is the amount of money you gained, while ROI expresses that profit as a percentage of what you invested. A $500 profit is a 50% ROI on $1,000 but only a 5% ROI on $10,000.