Finance

ROI Calculator

Calculate your return on investment instantly

$
$
$
yr

Return on Investment (ROI)

+50.00%

14.47% annualised · 3 yrs

$5,000.00
Net Profit
$10,000.00
Total Cost
1.50×
Multiple

For informational purposes only. Not financial advice. Consult a qualified professional.

What Is ROI?

ROI — Return on Investment — is the most universally used metric for evaluating whether an investment was profitable. It expresses the gain or loss as a percentage of the original cost, making it easy to compare investments of any size or type: stocks, real estate, marketing campaigns, equipment purchases, or business ventures.

The core formula is simple:
ROI = (Net Profit ÷ Total Cost) × 100
Where: Net Profit = Final Value − Total Cost

Simple ROI vs. Annualised ROI (CAGR)

Simple ROI tells you the total percentage gain over the entire holding period. Annualised ROI — equivalent to CAGR — converts that total gain into an equivalent per-year rate, enabling apples-to-apples comparisons across investments with different time horizons.

The annualised ROI formula is:
Annualised ROI = (Final Value ÷ Total Cost)^(1 ÷ Years) − 1

Example:

  • You invest $10,000. After 5 years it is worth $16,105. Simple ROI = 61.05%. Annualised ROI = 10% per year.
  • You invest $10,000. After 2 years it is worth $12,100. Simple ROI = 21%. Annualised ROI = 10% per year.

Both investments yield the same annual rate, but the simple ROI looks very different. Always compare annualised ROI when evaluating investments held for different time periods.

What Is a Good ROI?

Benchmarks vary by asset class and risk level:

  • Savings account / money market: 4–5% (risk-free, 2024 rates)
  • US Treasury bonds: 4–5% (near-risk-free)
  • S&P 500 (historical average): ~10% nominal / ~7% real (inflation-adjusted)
  • Residential real estate: 8–12% including appreciation and rental yield
  • Small business: 15–30% (compensates for risk and effort)
  • Venture capital: 20%+ target (compensates for high failure rate)

As a rule of thumb, any investment whose annualised ROI exceeds your cost of capital or the risk-free rate creates value.

The Importance of Including All Costs

ROI is only meaningful when calculated on your total cost basis — not just the headline purchase price. Common additional costs that erode real-world returns include:

  • Brokerage commissions and transaction fees
  • Capital gains taxes (short-term vs. long-term rates)
  • Property taxes, maintenance, and management fees (real estate)
  • Carrying costs: financing interest paid during the holding period
  • Closing costs on purchase and sale (real estate)
  • Inflation: real ROI = nominal ROI minus the inflation rate

Frequently Asked Questions

What is ROI and how is it calculated?
ROI (Return on Investment) measures the profitability of an investment as a percentage of its total cost. The formula is: ROI = (Net Profit ÷ Total Cost) × 100, where Net Profit = Final Value − Total Cost. A positive ROI means the investment gained value; a negative ROI means it lost value.
What is the difference between simple ROI and annualised ROI?
Simple ROI measures the total return over the entire holding period regardless of how long it was held. Annualised ROI (also called CAGR — Compound Annual Growth Rate) converts that total return into an equivalent annual rate so you can compare investments held for different lengths of time. For example, a 50% simple ROI over 10 years equals an annualised ROI of about 4.14% per year, while the same 50% gain over 2 years equals ~22.5% per year.
What is a good ROI?
A "good" ROI depends entirely on the context. The S&P 500 index has historically returned about 10% per year on average (7% after inflation). Real estate typically returns 8–12% annually including appreciation and rental income. A business investment might target 15–25% ROI to justify the risk. Any ROI above your cost of capital or the risk-free rate (e.g., T-bill yield) creates value.
Should I include transaction fees and taxes in my ROI calculation?
Yes — always use your net return after all costs for an accurate picture. This calculator includes an "Additional costs" field for brokerage commissions, carrying costs, capital gains taxes, maintenance, and other expenses. ROI calculated before fees can significantly overstate your actual gain, especially for real estate or business acquisitions with high transaction costs.
What is the Rule of 72?
The Rule of 72 is a quick mental shortcut: divide 72 by the annual ROI percentage to estimate how many years it takes for an investment to double. For example, at 8% per year: 72 ÷ 8 = 9 years to double. At 12% per year: 72 ÷ 12 = 6 years. This is an approximation of the true doubling time, which is ln(2) ÷ ln(1 + r).
How is ROI different from NPV or IRR?
ROI is a simple percentage return metric that does not account for the time value of money. NPV (Net Present Value) discounts future cash flows to today's value, making it better for multi-year projects with irregular cash flows. IRR (Internal Rate of Return) is the discount rate that makes NPV equal to zero — useful for comparing projects of different scales. For simple buy-and-hold investments, ROI and annualised ROI are usually sufficient.

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