ROI Calculator
Calculate return on investment, annualized return, and total gain or loss.
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How the ROI Calculator Works
Our ROI calculator measures the profitability of an investment by comparing what you put in to what you got out. Enter your initial investment, the final value, and how long you held the investment, and the calculator shows your total ROI, annualized return, and absolute gain or loss.
ROI Formula
The basic return on investment is calculated as:
ROI = (Final Value − Initial Investment) / Initial Investment × 100
For example, if you invested $10,000 and it grew to $15,000, your ROI is ($15,000 − $10,000) / $10,000 × 100 = 50%. This tells you the total percentage gain, but it doesn't account for how long the investment was held.
Annualized Return
Annualized return converts your total ROI into an equivalent yearly rate so you can compare investments held for different lengths of time:
Annualized = (Final Value / Initial Value)1/Years − 1
A 50% gain over 3 years translates to an annualized return of about 14.47% per year. This figure is far more useful than raw ROI when comparing a 3-year investment to a 10-year investment, because it normalizes for time.
ROI vs. Annualized Return
ROI shows the total percentage gain over the entire holding period. A 100% ROI sounds impressive, but if it took 10 years to achieve, the annualized return is only about 7.2% — comparable to a broad stock market index. Annualized return gives you a like-for-like comparison regardless of time horizon, while ROI tells you the raw total gain.
Limitations of ROI
Simple ROI does not account for the time value of money, fees, taxes, dividends, or the timing of cash flows. An investment that doubles in one year has the same ROI as one that doubles in twenty years, but they are very different investments. Always consider the holding period and use annualized return for fair comparisons. For investments with multiple cash flows over time, use IRR instead.
Tips for Using This Calculator
- Subtract any fees or commissions from the final value for a more accurate ROI.
- Add reinvested dividends to the final value to capture total return.
- Use annualized return when comparing investments held for different periods.
- Remember that past performance does not guarantee future results.
- For irregular cash flows, consider using the IRR calculator instead.
Frequently Asked Questions
Return on Investment (ROI) measures the profitability of an investment as a percentage. It is calculated by dividing the net gain (final value minus initial investment) by the initial investment and multiplying by 100.
Annualized return is calculated using the formula (final value / initial value)^(1/years) - 1. It shows the equivalent yearly return that would produce the total gain over the holding period, making it easier to compare investments held for different lengths of time.
ROI shows the total percentage gain over the entire holding period, while annualized return expresses that gain as an equivalent yearly rate. An investment held for 10 years with 100% ROI has an annualized return of about 7.2%, which is more useful for comparison.
This calculator uses the simple ROI formula and does not deduct fees, taxes, or add dividends. For a more precise figure, subtract any fees and add any income to the final value before entering it.