ROI Calculator (Return on Investment)
Calculate ROI (Return on Investment) from cost and final value, then see the optional annualized ROI to compare investments over different holding periods.
What is ROI?
ROI (Return on Investment) measures how efficiently money put into something turned into profit — expressed as a single percentage, so a stock, a rental property, and a marketing campaign can all be compared on the same scale. It answers one question: for every dollar you put in, how many cents (or dollars) did you get back?
This calculator takes a cost (what you invested) and a final value (what it's now worth or what you got back), computes the net profit and ROI, and — if you also give a holding period in years — an annualized ROI that spreads the return evenly across each year.
The core formula
- Net profit = Final value − Cost
- ROI % = Net profit ÷ Cost × 100
- A loss (final value below cost) is a fully valid, negative ROI — not an error.
Annualized ROI
Plain ROI ignores how long the money was invested. Annualized ROI fixes that by converting a total return into an equivalent yearly rate, using the same math as compound interest run in reverse:
where n is the number of years held. A 20% total ROI earned over 3 years annualizes to about 6.27%/year — much lower than "20%/year" would suggest, because compounding over 3 years needs a smaller yearly rate to reach the same 20% total.
Worked examples
1. Simple ROI, no time given. You invest $10,000 and it grows to $12,000. Net profit = 12,000 − 10,000 = $2,000. ROI = 2,000 ÷ 10,000 × 100 = 20%.
2. Same numbers, held 3 years. Same $10,000 → $12,000, but this time you also enter 3 years. The simple ROI is still 20%, but the annualized ROI is [(12,000/10,000)^(1/3) − 1] × 100 ≈ 6.27%/year — the fair, time-adjusted comparison figure.
3. A loss. You invest $10,000 and it's now worth only $8,000. Net profit = 8,000 − 10,000 = -$2,000. ROI = −2,000 ÷ 10,000 × 100 = -20% — a fully valid result, computed exactly the same way as a gain.
Common mistakes
- Ignoring the holding period. A 20% ROI over 10 years is nowhere close to a 20%/year return — always annualize before comparing investments held for different lengths of time.
- Forgetting fees and taxes. ROI only knows the two numbers you enter; leaving out transaction costs, management fees, or taxes overstates the true return.
- Confusing revenue with final value. ROI needs the value of what you hold now (or what you actually received), not gross revenue before expenses are subtracted.
- Treating a loss as an error. A negative ROI is a normal, valid result — it just means the final value came in below cost.
Related calculators
ROI is closely related to margin & markup, which also expresses profit as a percentage, but relative to a sale's revenue or cost rather than an investment's cost. The annualized-ROI math is the same compound-growth idea behind compound interest and future value — both project a starting amount forward using the same "growth factor raised to a power" pattern. If you're tracking how any single number (a price, a metric, a headcount) changed between two points without a cost/investment framing, the more general percentage change calculator is the direct tool.
Frequently asked questions
- What is ROI (Return on Investment)?
- ROI is the percentage of profit an investment made relative to what it cost. It's calculated as net profit (final value minus cost) divided by cost, times 100. A $10,000 investment that returns $12,000 has a net profit of $2,000 and an ROI of 20%.
- How do I calculate ROI?
- ROI % = (Final value − Cost) ÷ Cost × 100. Subtract the cost from the final value to get net profit, divide that by the cost, then multiply by 100. For example, $2,000 profit on a $10,000 cost gives 2,000 ÷ 10,000 × 100 = 20%.
- What is annualized ROI and why does it matter?
- Annualized ROI spreads a total return evenly over each year it was held, using a compound-growth root — [(Final value ÷ Cost)^(1/years) − 1] × 100. A 20% ROI over 1 year and a 20% ROI over 10 years are very different results, and annualized ROI is what makes them comparable.
- Can ROI be negative?
- Yes — a negative ROI simply means the final value was lower than the cost, i.e. a loss. Enter a final value below the cost (or 0 for a total loss) to see it; the calculator handles a loss exactly like a gain, just with a negative percentage.
- What's the difference between ROI and annualized ROI?
- Plain ROI is the total percentage return over the entire holding period, regardless of how long that period was. Annualized ROI converts that same total return into an equivalent average yearly rate, which is the only fair way to compare investments held for different lengths of time.
- Does ROI account for fees, taxes, or other costs?
- Only if you include them in the cost or subtract them from the final value yourself — the formula itself only knows the two numbers you give it. Ignoring transaction fees, taxes, or other carrying costs is one of the most common ROI mistakes, since it overstates the real return.
- Why is my ROI calculator not showing an annualized percentage?
- The annualized ROI only appears when you enter a number of years — leave that field blank and the calculator shows the simple ROI only, which is exactly how ROI is normally quoted when no holding period is specified.