How to use the roi calculator
- Enter the amount invested.
- Enter the final value: what the investment is worth now or was sold for, including any income you received.
- Optional: enter the time held in years to get the annualized ROI.
- Read the ROI, the net gain or loss and, if you entered a time, the yearly rate.
Formula
Gain = final value - amount invested
ROI = gain / amount invested x 100%
Annualized ROI = ((final value / amount invested)^(1 / years) - 1) x 100%
Annualized ROI is the constant yearly rate that would turn the amount invested into the final value, compounding once a year. It needs a time held greater than zero.
Worked examples
A gain: $10,000 grows to $14,500 over 4 years. The gain is $4,500, so ROI is 4,500 / 10,000 = 45.00%. The annualized ROI is (1.45)^(1/4) - 1 = 9.73% a year.
A loss: $10,000 falls to $7,500 over 2 years. The gain is -$2,500, ROI is -25.00% and the annualized figure is (0.75)^(1/2) - 1 = -13.40% a year.
The yearly rate is not 45 / 4 = 11.25%. Returns compound, so the same total return over more years means a lower yearly rate.
What counts as the final value
Include everything you got back: the sale price or current value, plus dividends, rent, interest or other income. Then subtract costs that reduced your return, such as purchase fees, commissions and repair costs, either from the final value or by adding them to the amount invested. The calculator uses the two numbers you enter and does not know which costs apply.
Why annualized ROI is useful
A 45% return sounds great, but over 4 years it is 9.73% a year, and over 10 years it would be only 3.8% a year. Annualizing lets you compare investments held for different lengths of time. You can also compare it with the rate on a savings account using the compound interest calculator, or work out a simple percent difference with the percent change calculator.
Limits of ROI
ROI says nothing about risk, and it ignores when money went in or out. If you added money over time, a single start and end value can mislead. Taxes and inflation also reduce what you keep and what it buys. Use ROI as a quick summary, not as the only measure of whether an investment was good.
Assumptions and limits
- Only the two values you enter are used. Extra deposits and withdrawals during the period are not modeled.
- Annualized ROI assumes one compounding step per year and a constant yearly rate.
- The amount invested must be greater than zero. The final value can be zero, which is a -100% return.
- Taxes, fees and inflation are not included unless you have already included them in your two values.
- Past performance does not predict future results.
- This is for general information, not financial advice.
Frequently asked questions
How do you calculate ROI?
Subtract the amount invested from the final value, divide by the amount invested and multiply by 100. For instance, turning $2,000 into $2,500 is a gain of $500, which is a 25% ROI.
What is annualized ROI?
It is the yearly growth rate that would produce the same total result over the time you held the investment, assuming yearly compounding. It makes investments held for different lengths of time comparable.
Can ROI be negative?
Yes. If the final value is below the amount invested, ROI is negative. A total loss is -100%. The annualized figure is negative too, and the calculator shows both.
What is a good ROI?
It depends on risk, time and your goals, so no single number is good for everyone. Compare the annualized ROI with alternatives that carry similar risk, and consider taxes and inflation.