ROI Calculator — Total and Annualized Return on Investment
ROI Calculator
Results summary
- Invested50.0%$1,000
- Profit50.0%$1,000
About this ROI calculator
Return on Investment (ROI) measures how much profit or loss an investment generated relative to the amount invested. It is one of the most widely used financial metrics because it is simple, intuitive, and effective for comparing profitability across different opportunities.
Annualized ROI (CAGR)
Total ROI = (Amount returned − Amount invested) ÷ Amount invested. Annualized ROI (also called CAGR) = (Returned ÷ Invested)^(1/years) − 1. The number of years is derived from your selected dates or the custom investment length.
When to use ROI
Understanding ROI
ROI is a universal profitability metric used in investing, business, and project analysis. It answers a simple question: “How much did I gain or lose compared to what I invested?” The result is expressed as a percentage. A positive ROI indicates profit, while a negative ROI indicates a loss.
Because basic ROI does not account for time, it is best suited for quick comparisons or investments with similar durations. When time matters, annualized ROI provides a clearer picture.
Annualized ROI (CAGR)
Annualized ROI converts your total return into an average yearly growth rate. This allows you to compare investments that last for different lengths of time on an equal basis.
Example: If you invest $10,000 and receive $15,000 after 3 years, your total ROI is 50%. The annualized ROI is (1.5)^(1/3) − 1 ≈ 14.5% per year.
When and how to use ROI
- Quick evaluation: Compare investments, projects, or business ideas at a glance.
- Benchmarking: Measure performance against an index, fund, or savings account.
- Project analysis: Apply ROI to marketing spend, real estate, or any investment with a clear cost and outcome.
Limitations and caveats
- No risk adjustment: ROI does not reflect volatility or uncertainty.
- Time sensitivity: Use annualized ROI to compare investments with different durations.
- Definition differences: Fees, taxes, and interim cash flows may or may not be included depending on how you define inputs.
Want to model compound growth?
- Classic projection: model a fixed horizon in the Investment Calculator (Classic).
- Goal planning: estimate how long it takes to reach a target using Investment Calculator (Goal).
- Historical context: compare outcomes with real market data via the S&P 500 backtest.