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ROI Calculator: Return on Investment
Enter what you paid, what it is worth now, and any income received and fees paid. The tool shows net profit, return on investment and, with a holding period, the annualised return.
How ROI is calculated
Return on investment compares the profit with what it cost to earn it: ROI = (total received − total outlay) ÷ total outlay. Here the total received is the final value plus any income, and the outlay is the amount invested plus fees and extra costs. Multiply by 100 for a percentage. A result of 25% means each unit invested produced a quarter of a unit of net profit.
Including fees and income matters. A sale that looks like a 20% gain on price alone can be a much smaller gain once commissions are paid, or a larger one once dividends are counted. If you leave income and fees at zero, the formula reduces to the plain price return.
Why the annualised figure matters
ROI ignores time. A 30% return over two years is far better than 30% over ten, yet both show the same ROI. The annualised return fixes this by finding the constant yearly growth rate that would produce the same total result: (1 + ROI)1 ÷ years − 1. For a 30% ROI, that is about 14.0% a year over two years and 2.7% a year over ten.
Dividing ROI by years gives a simple average, shown only for comparison. It overstates growth for gains and is not the right number for comparing investments held for different lengths of time. If you know the start and end values only, the CAGR calculator performs the same compounding calculation.
Comparing investments fairly
- Use the same costs. Count all fees on every option, or none.
- Match the period. Compare annualised figures when holding times differ.
- Look at risk. Two investments with equal ROI are not equal if one could have lost far more along the way.
- Count your own time and tax. A rental or business return rarely includes the hours you spend, and this tool does not model tax.
- Compare with the alternative. The useful question is often whether the return beat what a simple deposit would have paid.
Limits of a single ROI number
ROI treats all money as arriving at the end, so it cannot tell whether income came early or late, and it cannot handle several deposits at different dates. For that you need an internal rate of return. It also says nothing about inflation: a 10% return in a year with 8% inflation is a much smaller real gain. Use the result as a quick summary and not as a full appraisal of a business or property.
Worked example
An investor buys a rental share for 40,000, receives 3,000 in rent over four years, pays 1,500 in fees and sells for 52,000.
Inputs
| Amount invested | 40000 |
|---|---|
| Final value or sale proceeds | 52000 |
| Income received meanwhile | 3000 |
| Fees and extra costs | 1500 |
| Holding period in years (optional) | 4 |
Result
A profit of 13,500.00 on an outlay of 41,500.00.
| Total outlay (amount plus fees) | 41,500.00 |
|---|---|
| Total received (value plus income) | 55,000.00 |
| Net profit or loss | 13,500.00 |
| Return multiple | 1.3253 times |
| Annualised return (compounded) | 7.295% |
| Simple average per year (ROI ÷ years) | 8.133% |
- Formula: ROI = (value + income − cost − fees) ÷ (cost + fees). Annualised return = (1 + ROI)^(1 ÷ years) − 1.
Financial disclaimer: Results are estimates for planning and education. They are not financial, tax or legal advice. Fees, taxes, rates and rules vary by lender, product and country, so confirm figures with your provider or a qualified adviser before making decisions.
Frequently asked questions
How do I calculate ROI?
Subtract the total outlay from the total received to get net profit, then divide the profit by the outlay. Multiply by 100 to express it as a percentage.
What is a good ROI?
There is no universal answer. Compare the figure with the risk taken, the time held and what a safer alternative would have paid over the same period.
What is the difference between ROI and annualised ROI?
ROI is the total return over the whole holding period. Annualised ROI converts it into the equal yearly growth rate that would produce the same result.
Should fees be included in ROI?
Yes. Fees are part of the cost of earning the return, so leaving them out overstates the result.
Can ROI be negative?
Yes. A negative ROI means the investment returned less than its total cost. It cannot go below minus 100% in this calculator.
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References and sources
- Standard corporate-finance and investment texts: return on investment and annualised return.
- Investor.gov (U.S. SEC): guidance on evaluating investment performance and costs. Link