Return on Investment (ROI) Calculator

Calculation Summary

How this Return on Investment (ROI) Calculator works

This ROI Calculator uses the classic simple ROI formula based on your starting cost, final value and the time between them. You enter:

• Amount invested - how much money you put in at the start, including upfront costs.
• Amount returned - how much you got back (sale price, revenue or payout, including any cash flows you want to count).
• Investment time - either a start and end date, or a length in years, months and days.

Based on these inputs, the calculator:

1. Computes simple ROI (%):
   ROI = ((Final value - Initial cost) / Initial cost) x 100%
2. Shows your gain or loss in currency terms:
   Profit = Final value - Initial cost
3. Calculates annualized ROI so you can compare results across different time periods.

For annualized ROI, the calculator first converts your dates or length into years, then applies:

Annualized ROI = (Ending value / Beginning value)^{1 / Years} - 1

This is a simplified view: it does not automatically factor in taxes, inflation or the exact timing of intermediate cash flows. For more complex projects, people often also look at IRR (internal rate of return) or NPV (net present value).

What is ROI?

Return on Investment (ROI) is a basic profitability metric that compares how much you earned to how much you invested. In plain language, it answers:

“For every dollar I put in, how much did I get back?”

The standard formula is:

ROI = ((Gain from investment - Cost of investment) / Cost of investment) x 100%

If ROI is positive, the investment made money; at 0% you broke even; and if ROI is negative, you lost money.

ROI is popular because it is:

• Universal - can be applied to marketing campaigns, rental properties, stock trades, side projects and more.
• Easy to explain - it is a percentage, so it is simple to compare different ideas.

However, ROI also has important limitations:

• It ignores time unless you annualize it.
• It does not show risk or volatility.
• It can be distorted if “gain” and “cost” are defined inconsistently (for example, including or excluding taxes or overhead).

What Is a “Good” ROI?

Deciding what counts as a “good” return on investment (ROI) is not as simple as picking one ideal percentage. There is no universal benchmark that fits every situation. The quality of an ROI always depends on context: your risk tolerance, how long your money is invested, the type of asset or industry, and your own financial goals.

Risk tolerance. Investors differ in how much uncertainty and volatility they are comfortable with. If you prefer stability and want to avoid large swings in value, you may accept a lower but more predictable ROI in exchange for peace of mind. Investors who can tolerate bigger ups and downs often seek higher ROIs and are willing to accept a greater chance of short-term losses.

Investment time frame. The length of time an investment is held strongly influences what looks like a good return. When capital is tied up for many years, investors usually expect a higher ROI to compensate for reduced liquidity and long-term risk. Shorter-term investments may deliver a smaller percentage return, but they can still be attractive because the money comes back faster and can be reinvested elsewhere.

Industry and asset norms. Expectations for ROI vary across industries and asset classes. Capital-intensive sectors or projects with high regulatory, technical, or competitive barriers often need higher potential returns to attract funding. More mature or stable areas of the market may offer lower typical ROIs but with less uncertainty. Comparing an investment’s ROI against common figures in its own sector is often more meaningful than looking at the number in isolation.

Personal objectives. Ultimately, a “good” ROI is one that supports your specific financial objectives. Someone focused on steadily growing wealth might be satisfied with moderate, consistent returns. Another investor who prioritizes current income may care more about reliable cash flow than about maximizing the headline percentage. More conservative investors might judge an ROI as “good” if it primarily protects capital. Your definition of an acceptable return should match your goals, time horizon, and overall financial situation.

How to calculate ROI

You will often see the ROI formula written in two equivalent ways:

• Using final value and initial cost:
  ROI = ((Final value - Initial cost) / Initial cost) x 100%
• Using profit directly:
  ROI = (Profit / Initial cost) x 100%, where Profit = Final value - Initial cost.

Example 1 - simple investment

You invest $1,000 in a project. After it finishes, you receive $1,250 back.

• Initial cost = $1,000
• Final value = $1,250
• Profit = $1,250 - $1,000 = $250

ROI = 250 / 1,000 x 100% = 25%.

Calculating annualized ROI

Simple ROI tells you how much you gained or lost, but not how fast. An ROI of 30% earned in 6 months is very different from 30% earned over 5 years. To account for time, this calculator also shows annualized ROI.

The formula used (similar to CAGR) is:

Annualized ROI = (Ending value / Beginning value)^{1 / Years} - 1

If you already know simple ROI as a decimal (for example, 30% = 0.30), this can also be written as:

Annualized ROI = (1 + ROI)^{1 / Years} - 1

Example 2 - multi-year project

You invest $10,000 into a project. After 3 years, your investment is worth $14,641.

• Beginning value = $10,000
• Ending value = $14,641
• Simple ROI = (14,641 - 10,000) / 10,000 = 0.4641 → 46.41%

Annualized ROI = (14,641 / 10,000)^{1 / 3} - 1 ≈ 13.5% per year.

Use the ROI Calculator to compare different projects, campaigns or investments on the same percentage scale and to quickly check whether a return really beats a safer alternative once time is taken into account.

Frequently Asked Questions (FAQs)