Investment ROI Calculator
Calculate your Return on Investment (ROI) to understand the profitability of your investments.
Results:
What is Return on Investment (ROI)?
Return on Investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI measures the amount of return on a particular investment, relative to the investment's cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a ratio or a percentage.
Formula:
ROI = ((Final Value – Initial Investment) / Initial Investment) * 100%
For longer-term investments, it's also useful to understand the annualized ROI, which gives you an idea of the average yearly return. This helps in comparing investments with different time horizons.
Annualized ROI Formula:
Annualized ROI = ((1 + ROI)^ (1 / Investment Duration)) – 1 (where ROI is in decimal form, e.g., 0.50 for 50%)
Example:
Let's say you invested $10,000 (Initial Investment) in a stock. After 3 years (Investment Duration), the stock's value grew to $15,000 (Final Value).
- ROI = (($15,000 – $10,000) / $10,000) * 100% = ($5,000 / $10,000) * 100% = 50%
- To calculate the Annualized ROI: First, convert the ROI percentage to a decimal: 50% = 0.50.
- Annualized ROI = ((1 + 0.50)^(1 / 3)) – 1 = (1.50^0.3333) – 1 ≈ 1.1447 – 1 ≈ 0.1447 or 14.47%
This means your investment yielded a total return of 50% over 3 years, averaging about 14.47% per year.