Investment ROI Calculator
Calculate the Return on Investment (ROI) for your investments to understand their profitability.
Results:
Understanding Return on Investment (ROI)
Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, in relation to the investment's cost. To calculate ROI, the gain or loss from an investment is divided by the cost of the investment. The result is expressed as a percentage or ratio.
Formula:
ROI = ((Final Value – Initial Investment) / Initial Investment) * 100%
The Initial Investment is the total amount of money you put into the investment. The Final Value is the current market value of your investment or the amount you sold it for.
Annualized ROI:
To understand the performance over time, you can calculate the Annualized ROI. This normalizes the ROI over the holding period of the investment.
Annualized ROI Formula:
Annualized ROI = ((1 + ROI)^(1 / Investment Duration)) – 1) * 100%
Where ROI is expressed as a decimal (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 is now worth $15,000 (Final Value).
ROI Calculation:
ROI = (($15,000 – $10,000) / $10,000) * 100%
ROI = ($5,000 / $10,000) * 100%
ROI = 0.50 * 100% = 50%
Annualized ROI Calculation:
First, convert ROI to decimal: 50% = 0.50
Annualized ROI = ((1 + 0.50)^(1 / 3) – 1) * 100%
Annualized ROI = ((1.50)^(0.3333) – 1) * 100%
Annualized ROI = (1.1447 – 1) * 100%
Annualized ROI = 0.1447 * 100% = 14.47%
This means your investment has grown by 50% in total over 3 years, which averages to about 14.47% per year.