💹 ROI Calculator

How it works

Return on investment answers one plain question: for every dollar I put in, how many cents of profit came back? It turns results from wildly different investments — a stock, a rental property, a business ad campaign — into a single percentage you can compare head to head. A $2,000 profit means something very different on a $5,000 investment than on a $100,000 one, and ROI captures exactly that.

This calculator gives you both the total ROI and the annualized ROI, which spreads the return evenly across each year. Annualizing matters because a 30% return in one year is a very different achievement than 30% over five years — without it, slow investments can look deceptively good.

The formula

ROI = (final value − total cost) / total cost × 100%. Total cost should include everything: purchase price plus fees, commissions, taxes, and any money spent along the way. Annualized ROI: (1 + ROI)^(1/years) − 1, which is the steady yearly rate that would compound to the same result — the financial equivalent of an average speed.

Worked example

You buy shares for $5,000, pay $50 in commissions, and sell two years later for $6,800 with another $50 in fees. Total cost = $5,100, final value = $6,750 after the selling fee. Profit = 6750 − 5100 = $1,650. ROI = 1650 / 5100 × 100% ≈ 32.4%. Annualized: (1.324)^(1/2) − 1 ≈ 1.1506 − 1 ≈ 15.1% per year. Notice the annualized figure is less than half the total — the same gain stretched over two years.

Frequently asked questions

Is ROI the same as profit?
No. Profit is dollars; ROI is profit relative to what you spent. A $1,000 profit on a $2,000 investment (50% ROI) beats a $5,000 profit on a $50,000 investment (10% ROI) as a use of capital.

Can ROI be negative?
Yes — if you get back less than you put in. Sell that $5,100 investment for $4,000 and your ROI is (4000 − 5100)/5100 ≈ −21.6%. The formula handles losses the same way it handles gains.

What doesn't ROI tell me?
Risk, for one — a 20% ROI from a volatile crypto trade is not the same quality of return as 20% from a boring index fund. It also ignores the value of your time, which is why business owners often pair it with payback period.

Reading an ROI figure the right way

ROI compresses an entire investment story into one percentage, and that compression hides things you need to know. The most important is time. A 30% return earned over six months is outstanding. The same 30% spread over ten years is mediocre, roughly 2.7% a year. Whenever you see an ROI figure, ask over what period it was earned, then convert it to an annual rate before comparing it with anything else: a savings account, another investment, or the interest on a loan you might pay off instead.

ROI also says nothing about risk. A government bond and a speculative stock can both produce a 12% ROI in a given year, but they got there in completely different ways, and only one of them could plausibly have lost half your money along the way. Treat ROI as a scorekeeping tool, not a safety rating, and compare returns only between investments of roughly similar risk.

A worked example

Say you invest $12,000 in a broad market index fund. Three years later the holding is worth $15,300, and along the way it paid you $450 in dividends, which you kept as cash. Your total gain is the $3,300 of growth plus the $450 of income, which is $3,750. Divide by your $12,000 cost and the ROI is 31.25%.

Annualized, that is about 9.5% per year, which is the figure you can fairly set against other options. Now adjust for inflation. If prices rose about 3% a year over those three years, roughly 9.3% in total, your inflation-adjusted gain is closer to 20% than 31%. The nominal ROI flatters you; the real return is what your money actually buys.

One more comparison deserves a place in every ROI decision: debt repayment. Paying off a credit card charging 20% interest earns you a guaranteed, tax-free 20% return on every dollar, with zero risk. Few investments can promise that. It is why a sober ROI ranking often puts expensive debt at the top of the list, ahead of any fund or stock, even when the projected investment returns look higher on paper. The guarantee is the difference, and ROI alone will never show it to you.

Where ROI calculations go wrong

• Leaving out costs. Commissions, management fees, and taxes all come out of your real return. An investment that gained 10% before a 2% fee earned you 8%, whatever the brochure says.
• Forgetting income. Counting only the price change understates returns on dividend stocks, rental properties, and bonds. Count every dollar the investment put in your pocket, but do not count reinvested dividends twice.
• Comparing unlike periods. A five-year ROI and a one-year ROI cannot be ranked against each other until both are annualized.
• Adding money partway through. The simple ROI formula assumes one lump sum at the start. If you contributed monthly, the basic calculation will mislead you, and an internal rate of return gives a truer picture.

Frequently asked questions

What counts as a good ROI?

It depends on the risk taken and the time involved, so judge it against alternatives of similar risk. Over long periods, broad stock market indexes have historically returned roughly 7% to 10% a year before inflation. A return far above that usually means far more risk, or a short measurement window.

How is ROI different from annualized return?

ROI measures the total gain over the whole period, however long it lasted. Annualized return, often called CAGR, spreads that gain evenly across each year. A 31% ROI over three years annualizes to about 9.5% a year, which is the number you should use when comparing investments.

Should I include dividends and interest when calculating ROI?

Yes. ROI is meant to capture total return, so income the investment paid you belongs in the gain alongside any price increase. Leaving dividends out can badly understate the performance of income-producing investments. One caution: if dividends were reinvested, they are already inside the final value, so do not add them again.

Can ROI be negative, or higher than 100%?

Both happen. If an investment ends worth less than it cost, the gain is negative and so is the ROI. If it more than doubles, ROI passes 100%, meaning the profit alone exceeds your original stake. Very large ROIs usually involve tiny starting amounts, long holding periods, borrowed money, or all three.