ROI Calculator
Calculate return on investment percentage and annualized returns.
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Disclaimer: This calculator provides estimates for informational purposes only. Results are not financial advice. Consult a qualified financial advisor for decisions about your specific situation. Actual rates, terms, and conditions may vary by lender and individual circumstances.
How Does the ROI Calculator Work?
Return on Investment (ROI) measures the profitability of an investment as a percentage of the initial cost. It is one of the most widely used financial metrics because it provides a simple, universal way to compare the efficiency of different investments. The basic ROI formula divides net profit by total investment and multiplies by 100 to get a percentage. However, basic ROI does not account for the time period of the investment, which can be misleading when comparing a 2-year investment with a 10-year investment. That is why this calculator also computes annualized ROI, also known as CAGR (Compound Annual Growth Rate), which normalizes returns to a per-year basis for fair comparison. CAGR tells you what constant annual growth rate would have produced the same total return over the holding period.
ROI = ((Return Amount - Investment Amount) / Investment Amount) x 100How to Use This Calculator
Enter the total amount you invested (including all fees and transaction costs) and the total amount you received back (or the current value of your investment). Then enter how long you held the investment. The calculator shows your total ROI percentage, net profit in dollars, and the annualized return (CAGR). For the most accurate results, include all costs in your investment amount — purchase price, commissions, improvement costs, maintenance fees — and only include actual returns in the return amount.
Example Calculation
David bought a rental property for $200,000 in 2019 (including closing costs and initial repairs). After 5 years of collecting rent and covering expenses, he sold it for $310,000 (after selling costs). Total net rental income over the period was $40,000.
- 1Total investment = $200,000
- 2Total return = $310,000 (sale) + $40,000 (rental income) = $350,000
- 3Net profit = $350,000 - $200,000 = $150,000
- 4Total ROI = ($150,000 / $200,000) x 100 = 75%
- 5Annualized ROI (CAGR) = (($350,000 / $200,000)^(1/5) - 1) x 100 = 11.84%
Understanding Your Results
Total ROI shows your overall profit as a percentage of your investment. While useful, it does not tell the whole story because it ignores time. A 50% ROI over 2 years is far better than 50% over 10 years. That is why the annualized return (CAGR) is the more meaningful comparison metric. Compare your annualized ROI against benchmarks: the stock market averages about 10% annually, bonds about 4-5%, and a risk-free Treasury bill about 4-5% currently. If your investment underperforms these benchmarks on an annualized basis, you may want to consider whether the extra risk and effort are justified.
Factors That Affect ROI
Total Costs
Include all costs — purchase price, transaction fees, maintenance, taxes, and opportunity costs. Underestimating costs inflates apparent ROI.
Time Horizon
Longer holding periods generally produce higher total ROI but may produce lower annualized ROI. Compare investments on an annualized basis.
Risk Level
Higher-risk investments should deliver higher returns to compensate. A 12% return from volatile crypto is less impressive than 10% from a stable index fund.
Taxes and Fees
Capital gains taxes, management fees, and transaction costs reduce your real ROI. Always calculate after-tax, after-fee returns.
Tips & Best Practices
- ✓Always compare ROI on an annualized basis when evaluating investments of different time periods.
- ✓Include all costs (fees, taxes, maintenance, opportunity cost) to get the true ROI.
- ✓Past ROI does not guarantee future performance — consider risk alongside return.
- ✓Compare your ROI against relevant benchmarks: S&P 500 for stocks, Treasury bonds for risk-free rate.
- ✓For business investments, factor in the time and effort required. A 20% ROI that requires full-time management may be less attractive than a passive 10% return.