ROI Calculator
Calculate your Return on Investment quickly and accurately. Measure investment performance and compare opportunities to make smarter financial decisions.
What is Return on Investment?
ROI measures the gain or loss generated relative to the amount invested.
Simple to Understand
ROI expresses profit as a percentage of the original investment. A 50% ROI means you earned half of what you put in.
Compare Investments
Use ROI to compare different opportunities side by side - stocks vs. real estate vs. bonds - on a level playing field.
Set Goals
Knowing your target ROI helps you choose the right investments and evaluate whether your portfolio is on track.
Time Matters
Annualized ROI accounts for time, letting you fairly compare a 2-year investment with a 10-year investment.
Understanding the ROI Formula
Basic ROI Formula
ROI = (Final Value - Initial Investment) / Initial Investment x 100
Result is expressed as a percentage
Annualized ROI Formula
Annualized ROI = ((Final / Initial)1/n - 1) x 100
Where n = number of years held
ROI Calculation Examples
| Investment | Initial | Final | Years | Total ROI | Annualized ROI |
|---|---|---|---|---|---|
| Stock A | $10,000 | $15,000 | 3 | 50% | 14.5% |
| Real Estate | $50,000 | $80,000 | 5 | 60% | 9.9% |
| Bond Fund | $20,000 | $24,000 | 4 | 20% | 4.7% |
| Index Fund | $5,000 | $13,000 | 10 | 160% | 10.0% |
| Startup | $25,000 | $100,000 | 7 | 300% | 21.9% |
Annualized ROI is more useful for comparing investments held over different time periods.
Common ROI Benchmarks
S&P 500 Index
- Historical average: ~10% per year
- After inflation: ~7% per year
- Standard benchmark for stocks
Bonds & Fixed Income
- Government bonds: ~3-5% per year
- Corporate bonds: ~5-7% per year
- Lower risk, lower return
Real Estate
- Average appreciation: ~4% per year
- With rental income: ~8-12% per year
- Varies greatly by location
Savings & CDs
- High-yield savings: ~4-5% per year
- CDs: ~4-5% per year
- FDIC insured, lowest risk
ROI vs. Other Metrics
| Metric | What It Measures | Best For |
|---|---|---|
| ROI | Total percentage gain or loss | Quick comparison of profitability |
| CAGR | Compound annual growth rate | Smoothed annualized return over time |
| IRR | Internal rate of return with cash flows | Investments with irregular cash flows |
| NPV | Net present value (time value of money) | Capital budgeting and project evaluation |
Key difference: ROI is simple but ignores time. CAGR and IRR account for time and cash flow timing, making them more accurate for long-term investments with multiple contributions or withdrawals.
Frequently Asked Questions
A "good" ROI depends on the investment type and risk level. The S&P 500 has historically returned about 10% annually, so any investment consistently beating that is strong. For lower-risk investments like bonds, 4-6% is considered good. For real estate, 8-12% including rental income is solid. Always compare ROI within the same asset class and account for risk.
Total ROI shows your entire gain or loss as a single percentage, regardless of time. A 100% total ROI over 2 years is very different from 100% over 20 years. Annualized ROI converts total return into a yearly rate, allowing fair comparison between investments held for different periods. A 100% total ROI over 2 years is about 41% annualized, while over 20 years it is only about 3.5% annualized.
No, basic ROI does not factor in risk. Two investments could both show 10% ROI, but one might be a stable bond fund while the other is a volatile startup. For risk-adjusted returns, consider metrics like the Sharpe Ratio (return per unit of risk) or the Sortino Ratio (return per unit of downside risk). Higher ROI with higher risk is not necessarily better.
For real estate, include all costs and income sources. Your initial investment includes the down payment, closing costs, and any renovation expenses. Your final value includes the property sale price minus selling costs, plus all net rental income received during ownership. ROI = (Total Gains - Total Costs) / Total Costs x 100. Do not forget to include expenses like property taxes, insurance, maintenance, and mortgage interest in your calculations.
