Return on Investment (ROI) Calculator
Analyze the efficiency and profitability of your financial investments.
Investment Results
Total Profit/Loss
Total ROI
Annualized ROI
Understanding Your Return on Investment (ROI)
Return on Investment (ROI) is a critical financial metric used to evaluate the profitability of an investment or compare the efficiency of several different investments. Whether you are investing in the stock market, real estate, or a marketing campaign, ROI tells you how much money you made (or lost) relative to the cost of the investment.
How the ROI Calculation Works
The standard ROI formula is straightforward. It subtracts the initial cost of the investment from the final value of the investment to determine the net profit, then divides that net profit by the initial cost.
Total ROI vs. Annualized ROI
While Total ROI shows your cumulative gain over the entire life of the investment, Annualized ROI provides the geometric average amount of money earned by an investment each year over a given time period. This is essential for comparing two investments held for different lengths of time.
Real-World Example
Suppose you purchase shares in a company for $5,000. After 3 years, you sell those shares for $7,500.
- Initial Investment: $5,000
- Final Value: $7,500
- Net Profit: $2,500
- Total ROI: 50% ($2,500 / $5,000)
- Annualized ROI: ~14.47% (reflecting the compounded annual growth rate)
Limitations of ROI
While ROI is a powerful tool, it does not account for risk or volatility. A high ROI might come from an extremely risky investment. It also does not factor in taxes, maintenance fees, or inflation unless specifically subtracted from the "Amount Returned." Use this calculator as a baseline for your financial planning.