ROI Calculator
Calculate return on investment, and annualized return if held over multiple years.
Comment ça marche
Return on Investment (ROI) measures the total gain or loss on an investment as a percentage of what you originally put in: ROI = (Final value − Initial value) ÷ Initial value × 100. A $2,000 investment that grows to $2,600 has a gain of $600, for an ROI of (600 ÷ 2000) × 100 = 30%.
That 30% figure describes the entire holding period, however long it was — which makes ROI alone misleading when comparing investments held for different lengths of time. A 30% return over 1 year is a very different result than a 30% return over 10 years.
That's what annualized ROI (calculated the same way as CAGR) solves: it spreads the total return evenly across each year, using ((Final ÷ Initial)^(1/years) − 1) × 100. That same 30% total return over 5 years annualizes to about 5.39% per year — a much more modest-sounding figure once spread out, and one that can be fairly compared against other investments' annual returns.
ROI has real limitations worth knowing: it treats the investment as a single lump sum in and a single lump sum out, so it doesn't naturally handle additional contributions or withdrawals partway through, and it says nothing about risk — two investments can have identical ROI while carrying very different levels of volatility or chance of loss along the way. For cases with multiple cash flows at different times, a more advanced metric called IRR (Internal Rate of Return) is typically used instead.
ROI is used across very different contexts with the same underlying formula: evaluating a stock or fund's performance, assessing whether a real estate investment (rental income plus appreciation, minus costs) was worthwhile, or judging whether a business initiative — a marketing campaign, new equipment, or a cost-saving project — paid for itself.
What's the difference between ROI and annualized ROI?
ROI is the total return over the whole period; annualized ROI spreads that return evenly per year, making different holding periods comparable.
Why does the same ROI look so different when annualized?
Because annualizing divides the total growth across every year of the holding period — a large total return achieved slowly over many years annualizes to a much smaller yearly figure than the same return achieved quickly.
Does ROI account for risk?
No — ROI purely measures return, not the volatility or uncertainty involved in achieving it. Two investments with identical ROI can carry very different levels of risk.
What is IRR, and how is it different from ROI?
IRR (Internal Rate of Return) handles investments with multiple cash flows at different times (like periodic contributions or withdrawals), while ROI assumes a single lump sum in and a single lump sum out.
Can ROI be negative?
Yes — a negative ROI means the investment lost value, with the final amount lower than the initial amount invested.
How do I use ROI to compare a stock investment to a real estate investment?
Calculate the total gain (including any income received, like dividends or rent, plus appreciation, minus costs) as a percentage of the amount invested for each — then compare the annualized figures if the holding periods differ.
Is a higher ROI always better?
Generally yes, all else equal, but it's worth considering alongside risk, time horizon, and whether the return is annualized — a higher raw ROI over a much longer period can actually represent a lower annual return.
What counts as the 'final value' for ROI on a business investment?
Typically the total benefit received — cost savings, additional revenue, or resale value — compared against the total cost of the initiative, similar to how a financial investment's final value includes any income plus appreciation.
Do I need to provide a holding period to calculate ROI?
No — basic ROI only needs initial and final values. The holding period (in years) is only needed to additionally calculate the annualized return.
How is ROI used to evaluate a marketing campaign?
Treat the campaign cost as the 'initial' investment and the additional revenue it generated as the 'final' value gained — the same ROI formula applies, showing whether the campaign paid for itself and by how much.
What's a 'good' ROI to aim for?
There's no universal answer — it depends heavily on the type of investment, time period, and risk involved; comparing a result against similar investments or a relevant benchmark is more meaningful than judging ROI in isolation.