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ROI (Return on Investment) Calculator

Investment Summary

Total Investment Gain: $0.00
ROI: 0.00%
Annualized ROI: 0.00%
function calculateROI() { var invested = parseFloat(document.getElementById('amountInvested').value); var returned = parseFloat(document.getElementById('amountReturned').value); var years = parseFloat(document.getElementById('investmentPeriod').value); var resultsDiv = document.getElementById('roiResults'); if (isNaN(invested) || isNaN(returned) || invested 0) { var annualized = (Math.pow((returned / invested), (1 / years)) – 1) * 100; document.getElementById('annualizedROI').innerText = annualized.toFixed(2) + "%"; document.getElementById('annualizedContainer').style.display = 'flex'; } else { document.getElementById('annualizedContainer').style.display = 'none'; } resultsDiv.style.display = 'block'; }

Understanding ROI: Why It Matters for Your Portfolio

Return on Investment (ROI) is a fundamental financial metric used to evaluate the efficiency of an investment or compare the efficiencies of several different investments. Whether you are trading stocks, purchasing real estate, or investing in marketing for your business, knowing your ROI helps you make data-driven decisions.

The Basic ROI Formula

The standard way to calculate ROI is by taking the net profit of the investment and dividing it by the original cost. The formula looks like this:

ROI = [(Current Value – Cost of Investment) / Cost of Investment] × 100

Total ROI vs. Annualized ROI

While total ROI shows you the overall growth of your capital, it doesn't account for time. For instance, a 50% return is excellent if it happens in one year, but less impressive if it takes 20 years. This is where Annualized ROI becomes crucial. It represents the geometric mean of the amount of money earned by an investment each year over a given time period.

Example Calculation

  • Initial Investment: $10,000
  • Final Value: $15,000
  • Time Period: 3 Years

In this scenario, your Total ROI is 50% (a $5,000 profit). However, your Annualized ROI is approximately 14.47%. This provides a clearer picture of how your money performed year-over-year compared to other assets like savings accounts or index funds.

Limitations to Consider

While ROI is a powerful tool, it does have limitations. It does not account for risk, taxes, or maintenance fees. For a complete financial analysis, always consider ROI alongside other metrics like Net Present Value (NPV) and Internal Rate of Return (IRR).

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