ROI Calculator
How It Works
Return on investment (ROI) is the most universal measure of investment performance. It answers a simple question: for every dollar you put in, how many dollars did you get back — and what does that represent as a percentage of your original investment? ROI lets you compare investments of different sizes, types, and time horizons on the same scale.
The basic ROI formula is straightforward: subtract the initial investment from the final value to get net profit, then divide by the initial investment and multiply by 100 to express it as a percentage. A $10,000 investment that grows to $15,000 has a net profit of $5,000 and an ROI of 50%. This tells you the total return, but says nothing about how long it took.
That's where annualized ROI becomes essential. A 50% total return over 1 year is a very different outcome than 50% over 10 years. Annualized ROI — also called Compound Annual Growth Rate (CAGR) — converts total return into a per-year equivalent, assuming the returns compound each year. The formula is: ((1 + ROI/100)^(1/years) − 1) × 100. A 50% total return over 3 years works out to approximately 14.5% per year annualized — a strong but achievable return from a diversified equity portfolio over that period.
Annualized ROI enables meaningful comparison between investments held for different periods. You can compare a real estate investment held 7 years against a stock portfolio held 3 years, or evaluate whether a business investment generated better returns than simply putting the money in an index fund. Without annualizing, time-distorted comparisons lead to misleading conclusions.
ROI calculations work for any type of investment: stocks and ETFs, real estate (use purchase price as initial investment and current value plus rental income as final value), business investments, savings accounts, or any capital deployment. For investments with intermediate cash flows (like rental properties with monthly rent), this simple model shows the pure capital appreciation component — a more complete model would incorporate cash flow returns as well.
Negative ROI indicates a loss. If your initial investment of $10,000 is now worth $7,000, your ROI is -30%. This is entirely normal for individual stocks or concentrated positions. What matters long-term is your portfolio's overall ROI, not any single position. Use this calculator to honestly assess what your investments have actually returned — the math doesn't care what you hoped for.
Formula Breakdown
ROI Calculation: Net Profit = Final Value − Initial Investment Example: $15,000 − $10,000 = $5,000 ROI (%) = (Net Profit / Initial Investment) × 100 Example: ($5,000 / $10,000) × 100 = 50.0% Annualized ROI (CAGR) = ((1 + ROI/100)^(1/years) − 1) × 100 Example: ((1 + 0.5)^(1/3) − 1) × 100 = 14.5% per year Annualized ROI is not available when years = 0 (no holding period specified). If initial investment = 0, ROI is undefined.
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