ROI Calculator
Return on investment and net profit — plus the annualized rate when you add a holding period.
Updated
Used for the annualized return. Leave at 0 to skip.
Return on investment
+50%ROI
$2,500.00 net profit
- Net profit
- $2,500.00
- Total ROI
- +50%
- Annualized (per year)
- +22.47%
Estimates for general information, not financial advice.
In short
How do you calculate ROI?
ROI % = (final − initial) ÷ initial × 100. Turning $5,000.00 into $7,500.00 is (7,500 − 5,000) ÷ 5,000 × 100 = 50%, a $2,500.00 net profit. Held for 2 years that same 50% is only 22.47% a year, because the annualised rate is ((final ÷ initial)^(1 ÷ years) − 1) × 100 and each year compounds on the last.
Simple ROI has no unit of time in it, so a 50% return earned in one year and one earned over ten look identical until you annualise them.
How to use the ROI calculator
Enter what you put in as the initial investment, what it ended up worth as the final value, and, if you want the per-year figure, how many years you held it. You get the ROI as a percent and the net profit in dollars.
The defaults work a typical case: $5,000.00 growing to $7,500.00 is a 50% ROI and a $2,500.00 net profit, and over a 2-year holding period that is 22.47% a year. Change any input and the result updates immediately.
Include your costs in the initial figure, because a commission, a platform fee, or a load paid on the way in is money you invested even though none of it bought any of the asset.
50%
ROI at the defaults
$5,000.00 grown to $7,500.00
$2,500.00
Net profit
final value minus initial investment
22.47%
Annualised over 2 years
the same gain as a yearly rate
ROI answers one plain question: for every dollar you put in, how much came back on top? Subtract the initial amount from the final amount to get the profit, divide by the initial amount, and read it as a percent. A 50% ROI means fifty cents of profit for every dollar you started with.
It is the most portable measure in finance precisely because it is so simple: it works on a share, a rental property, a marketing campaign, a piece of equipment, or a training course, and it needs nothing but two numbers. That portability is also the reason it gets misused, because two ROIs that look comparable often are not.
ROI also says nothing about risk, and nothing about money that moved in or out along the way. Two investments can post an identical ROI while one was a steady climb and the other could easily have gone the other way, and the number gives you no hint which was which.
Because the formula compares only a starting and an ending value, it also ignores dividends, interest, rent collected, or extra deposits made partway through, all of which belong in a full picture of what you earned.
Do
- Include commissions, platform fees and loads in the initial investment figure.
- Use the amount you would actually walk away with after selling costs as the final value.
- Annualise before comparing two investments held for different lengths of time.
- Account for dividends, rent and interim deposits separately, outside this formula.
Don't
- Quote a multi-year total as though it were a rate earned each year.
- Read two identical ROIs as equally good, since neither says what risk was taken.
- Assume a 20 percent loss needs a 20 percent gain to reverse, because it needs 25.
- Compare a total return against a savings rate or bond yield quoted per year.
The same total return, restated as an annual rate for different holding periods. This is the grid that shows why a headline ROI cannot be compared across investments: every row is one number in the left column and five very different answers to how good was it.
| Total return over the whole holding period | Annualised over 1 year | Over 3 years | Over 5 years | Over 10 years | Over 20 years |
|---|---|---|---|---|---|
| −50% | −50.00% | −20.63% | −12.94% | −6.70% | −3.41% |
| −25% | −25.00% | −9.14% | −5.59% | −2.84% | −1.43% |
| −10% | −10.00% | −3.45% | −2.09% | −1.05% | −0.53% |
| +10% | 10.00% | 3.23% | 1.92% | 0.96% | 0.48% |
| +20% | 20.00% | 6.27% | 3.71% | 1.84% | 0.92% |
| +25% | 25.00% | 7.72% | 4.56% | 2.26% | 1.12% |
| +50% | 50.00% | 14.47% | 8.45% | 4.14% | 2.05% |
| +75% | 75.00% | 20.51% | 11.84% | 5.76% | 2.84% |
| +100% | 100.00% | 25.99% | 14.87% | 7.18% | 3.53% |
| +150% | 150.00% | 35.72% | 20.11% | 9.60% | 4.69% |
| +200% | 200.00% | 44.22% | 24.57% | 11.61% | 5.65% |
| +300% | 300.00% | 58.74% | 31.95% | 14.87% | 7.18% |
| +400% | 400.00% | 71.00% | 37.97% | 17.46% | 8.38% |
| +900% | 900.00% | 115.44% | 58.49% | 25.89% | 12.20% |
Annualising: the same return at different speeds
The one thing a bare ROI hides is time, which is why this tool also shows an annualised rate. A 50% return is remarkable in a year and unremarkable over ten, yet both read as 50% ROI.
The compound annual growth rate restates the return as a steady per-year figure, and the reference table above carries the full grid across holding periods from one year to twenty. Comparing two investments held for different lengths of time is essentially meaningless until they sit on the same annual footing, and annualising is the step that puts them there.
Read it: The arithmetic is unforgiving: the same headline gain melts from 50 percent a year to barely 4 as the holding period stretches to a decade.
Computed from annualised % = ((1 + total return)^(1 ÷ years) − 1) × 100.
Running a rate forward instead?
The annualised figure is a compounding rate: 22.47% twice over turns $5,000.00 into $7,500.00. The compound interest calculator runs that forward from a balance over a term you set.
Open the compound interest calculator →The formula, worked line by line
ROI is profit divided by what you invested, read as a percent. It has no time dimension at all, which is both why it travels so well between very different investments and why it misleads so easily. The formula does not know whether the gain took a week or a decade, so two results that look identical can represent completely different rates of return.
The annualised rate fixes that by asking a different question: what steady per-year rate, compounding on itself, would turn the initial value into the final one over the period you actually held it? That is the compound annual growth rate, and it is the honest figure whenever holding periods differ. When they are the same, the simple ROI compares them perfectly well.
ROI % = (final − initial) ÷ initial × 100
net profit = final − initial
annualised % = ((final ÷ initial)^(1 ÷ years) − 1) × 100 (when years > 0)
$5,000 → $7,500 over 2 years: 50% total, 22.47% a year- Final value
- $7,500.00
- Initial investment
- − $5,000.00
- Net profit
- $2,500.00
- ROI
- 2,500 ÷ 5,000 × 100 = 50%
Held over 2 years, that same 50% works out to 22.47% annualised, because ((7,500 ÷ 5,000)^(1 ÷ 2) − 1) × 100 = (1.5^0.5 − 1) × 100 = 22.4745%. Check it by compounding forward: 5,000 × 1.224745 × 1.224745 = 7,500, exactly. Stretch the same gain across 10 years instead and the annualised rate collapses to 4.14%, which is the whole argument for annualising.
Simple ROI is the honest number when you are comparing two things held over the same period, when there is no meaningful holding period at all, or when you want a plain statement of how much came back.
The annualised rate is the honest number whenever holding periods differ, or whenever you want to compare an investment against a rate quoted per year, such as a savings account or a bond yield. Quoting a multi-year total as though it were an annual figure is one of the most common ways performance gets oversold, and it is almost always the total ROI being passed off as a rate.
ROI can be negative, and losses are asymmetric in a way the percentage disguises. $5,000.00 falling to $4,000.00 is (4,000 − 5,000) ÷ 5,000 × 100 = −20% ROI. Getting back to $5,000.00 from $4,000.00 then requires a +25% gain, because the recovery is measured against the smaller base.
Keep in mind too what neither figure captures: the risk taken to earn the return, and any interim cash such as dividends, interest, or additional deposits, none of which appear in a formula that looks only at the first and last values.
Questions people ask
What is ROI?
ROI, or return on investment, measures profit relative to what you put in. Subtract the initial investment from the final value to get the profit, divide by the initial investment, and read the result as a percent: ROI % = (final − initial) ÷ initial × 100. A 50% ROI means fifty cents of profit for every dollar you started with. It works on shares, property, equipment, or a marketing campaign, because it needs nothing but a starting figure and an ending one.
How do I calculate ROI on a $5,000 investment that grew to $7,500?
Subtract the initial from the final, divide by the initial, and multiply by 100: (7,500 − 5,000) ÷ 5,000 × 100 = 50%. The net profit is the top of that fraction, $2,500.00. If you held it for 2 years, the annualised rate is ((7,500 ÷ 5,000)^(1 ÷ 2) − 1) × 100 = 22.47% a year. Include any commissions or fees you paid in the initial figure, since those are part of what the investment cost you.
What is the annualised return, and why does it differ from ROI?
The annualised return, or compound annual growth rate, restates a total return as a steady per-year rate: annualised % = ((final ÷ initial)^(1 ÷ years) − 1) × 100. A 50% total return is 50.00% a year over one year, 22.47% over two, 8.45% over five, and 4.14% over ten, because each year compounds on the one before. Simple ROI contains no unit of time, so annualising is what lets you compare investments held for different lengths of time.
Can ROI be negative?
Yes. A negative ROI just means a loss: the final value came in below the initial investment. For example, $5,000.00 falling to $4,000.00 is (4,000 − 5,000) ÷ 5,000 × 100 = −20% ROI. Recovering from that is harder than the symmetry suggests, because getting back to $5,000.00 from $4,000.00 needs a +25% gain, measured against the smaller balance. The larger the loss, the wider that asymmetry gets.
What does ROI leave out?
A bare ROI ignores time, risk, and interim cash flows. Two investments with the same ROI can have taken wildly different risks to get there, and the number gives no clue which. Because the formula compares only a starting and an ending value, it also skips dividends, interest, rent, or extra deposits that moved in or out along the way. Use the annualised rate to handle time, add interim cash into your own figures, and treat ROI as a headline rather than the full picture.
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