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ROI Calculator

Calculate your return on investment (ROI) to measure the profitability of your investments. See both total and annualized returns.

Total ROI
+50.00%
Total Gain+$5,000
Annualized ROI+14.47%
Period3 years
$
$

Investment Summary

Total ROI
+50.00%
Annualized ROI
+14.47%
Total Gain
+$5,000
Initial Investment
$10,000
Final Value
$15,000
Investment Period
3 years

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What is ROI?

Return on Investment (ROI) is a simple yet powerful metric that measures how much money you made (or lost) relative to how much you invested. Think of it as a "bang for your buck" measurement.

If you invested $100 and now have $150, your ROI is 50%. Simple as that.

ROI is expressed as a percentage, making it easy to compare investments of different sizes. A $100 investment with 50% ROI and a $10,000 investment with 50% ROI are equally "efficient" in terms of returns.

The ROI Formula

ROI=Final Value−Initial InvestmentInitial Investment×100%\text{ROI} = \frac{\text{Final Value} - \text{Initial Investment}}{\text{Initial Investment}} \times 100\%

Let's break it down:

  • Final Value: What your investment is worth now (or when you sold it)
  • Initial Investment: What you originally paid
  • The difference: Your profit (or loss if negative)

Example: You bought stock for $1,000 and sold it for $1,300.

ROI=$1,300−$1,000$1,000×100%=30%\text{ROI} = \frac{\$1,300 - \$1,000}{\$1,000} \times 100\% = 30\%

Annualized ROI: The Fair Comparison

Here's a problem: You made 50% on Investment A in 5 years, and 30% on Investment B in 1 year. Which is better?

At first glance, 50% seems better. But wait — that 30% happened in just ONE year!

Annualized ROI converts any return to an equivalent annual rate:

Annualized ROI=(1+ROI)1Years−1\text{Annualized ROI} = \left(1 + \text{ROI}\right)^{\frac{1}{\text{Years}}} - 1

For Investment A (50% over 5 years):

Annualized ROI=(1+0.50)1/5−1=8.45%\text{Annualized ROI} = (1 + 0.50)^{1/5} - 1 = 8.45\%

For Investment B (30% over 1 year):

Annualized ROI=(1+0.30)1/1−1=30%\text{Annualized ROI} = (1 + 0.30)^{1/1} - 1 = 30\%

Investment B is actually much better! It earns 30% per year vs. only 8.45% per year.

Always use annualized ROI when comparing investments with different time horizons. A 100% return over 10 years (7.2% annualized) is worse than 50% over 3 years (14.5% annualized).

Real-World ROI Examples

Stock Market (S&P 500 historical average):

  • Average annualized return: ~10%
  • $10,000 invested for 30 years → ~$174,000

Real Estate:

  • Typical rental property: 8-12% annual ROI (including appreciation and rental income)
  • House flip: 10-20% ROI per project (but consider the time and work involved)

Starting a Business:

  • High risk, but potential for 100%+ ROI
  • Many businesses fail (negative ROI), while successful ones can return 10x or more

Education:

  • College degree: ~15% lifetime ROI (higher earnings vs. cost of education)
  • Professional certifications: Often 20-50% ROI within a few years

Limitations of ROI

ROI is useful but has blind spots:

  1. Ignores Time (unless you use annualized ROI)

    • 100% in 1 year ≠ 100% in 10 years

  2. Ignores Risk

    • A 15% ROI from government bonds is very different from 15% ROI from crypto

  3. Ignores Cash Flow Timing

    • $100/month for 12 months vs. $1,200 at month 12 have different values

  4. Doesn't Account for Inflation

    • 5% ROI with 3% inflation = only 2% "real" return

For a complete picture, consider using ROI alongside other metrics like IRR (Internal Rate of Return), NPV (Net Present Value), or risk-adjusted returns like the Sharpe Ratio.

Tips for Better Investment Decisions

  1. Always compare annualized ROI — not just total returns
  2. Factor in all costs — fees, taxes, and transaction costs reduce your actual ROI
  3. Consider opportunity cost — what else could you do with that money?
  4. Don't chase high ROI blindly — higher returns usually mean higher risk
  5. Track your actual ROI — many investors overestimate their returns due to selective memory
  6. Be honest about losses — a 50% loss requires a 100% gain just to break even