#roi-calculator {
font-family: 'Arial', sans-serif;
border: 1px solid #ddd;
padding: 20px;
border-radius: 8px;
max-width: 500px;
margin: 20px auto;
box-shadow: 0 2px 4px rgba(0,0,0,0.1);
}
#roi-calculator h2, #roi-calculator h3 {
text-align: center;
color: #333;
margin-bottom: 20px;
}
.input-group {
margin-bottom: 15px;
display: flex;
flex-direction: column;
}
.input-group label {
margin-bottom: 5px;
font-weight: bold;
color: #555;
}
.input-group input[type="number"] {
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 1em;
}
#roi-calculator button {
display: block;
width: 100%;
padding: 12px 20px;
background-color: #007bff;
color: white;
border: none;
border-radius: 4px;
font-size: 1.1em;
cursor: pointer;
transition: background-color 0.3s ease;
margin-top: 20px;
}
#roi-calculator button:hover {
background-color: #0056b3;
}
.calculator-results {
margin-top: 30px;
padding-top: 20px;
border-top: 1px solid #eee;
text-align: center;
}
#roiResult, #annualizedROIResult {
margin-top: 10px;
font-size: 1.1em;
color: #28a745;
font-weight: bold;
}
function calculateROI() {
var initialInvestment = parseFloat(document.getElementById("initialInvestment").value);
var finalValue = parseFloat(document.getElementById("finalValue").value);
var investmentDuration = parseFloat(document.getElementById("investmentDuration").value);
var roiResultElement = document.getElementById("roiResult");
var annualizedROIResultElement = document.getElementById("annualizedROIResult");
// Clear previous results
roiResultElement.innerHTML = "";
annualizedROIResultElement.innerHTML = "";
if (isNaN(initialInvestment) || isNaN(finalValue) || isNaN(investmentDuration)) {
roiResultElement.innerHTML = "Please enter valid numbers for all fields.";
roiResultElement.style.color = "red";
return;
}
if (initialInvestment <= 0) {
roiResultElement.innerHTML = "Initial Investment must be greater than zero.";
roiResultElement.style.color = "red";
return;
}
if (investmentDuration <= 0) {
roiResultElement.innerHTML = "Investment Duration must be greater than zero.";
roiResultElement.style.color = "red";
return;
}
var profit = finalValue – initialInvestment;
var roi = (profit / initialInvestment) * 100;
// Calculate annualized ROI
// Formula: ((Final Value / Initial Investment) ^ (1 / Years)) – 1
var annualizedROI = (Math.pow((finalValue / initialInvestment), (1 / investmentDuration)) – 1) * 100;
roiResultElement.innerHTML = "Total ROI: " + roi.toFixed(2) + "%";
roiResultElement.style.color = "#28a745";
annualizedROIResultElement.innerHTML = "Annualized ROI: " + annualizedROI.toFixed(2) + "%";
annualizedROIResultElement.style.color = "#28a745";
}
Understanding 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 formula for basic ROI is:
ROI = ( (Final Value – Initial Investment) / Initial Investment ) * 100
A positive ROI indicates that the investment generated profit, while a negative ROI indicates a loss.
Annualized ROI
While simple ROI tells you the total return over the entire period, it doesn't account for the time value of money or the duration of the investment. Annualized ROI addresses this by calculating the average annual rate of return over the life of the investment. This makes it easier to compare investments with different holding periods.
The formula for Annualized ROI is:
Annualized ROI = ( (Final Value / Initial Investment) ^ (1 / Investment Duration in Years) ) – 1
The result is then multiplied by 100 to express it as a percentage.
Why is ROI Important?
- Profitability Assessment: It directly shows how profitable an investment has been.
- Investment Comparison: It allows you to compare different investment opportunities on an equal footing, regardless of their initial cost or duration.
- Decision Making: It helps investors decide whether to pursue an investment, hold onto it, or divest.
- Performance Tracking: It's a key metric for tracking the performance of your investment portfolio over time.
Example Calculation:
Let's say you invested $10,000 (Initial Investment) in a stock. After 3 years (Investment Duration), the value of your investment grew to $15,000 (Final Value).
- Profit: $15,000 – $10,000 = $5,000
- Total ROI: ($5,000 / $10,000) * 100 = 50.00%
- Annualized ROI: (($15,000 / $10,000) ^ (1 / 3)) – 1 = (1.5 ^ 0.3333) – 1 ≈ 1.1447 – 1 ≈ 0.1447, which is 14.47%
In this example, the investment yielded a total of 50% return over three years, with an average annual return of approximately 14.47%.