ROI Calculator
Return on investment as a percentage of what you put in, annualised over the holding period.
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Your details
Leave blank for a simple, un-annualised return.
Result
- Return on investment
- 50.00%
- Net profit
- $5,000.00
- Multiple
- 1.50×
- Annualised return
- 14.47%
Gain on the amount invested
The steady yearly rate that turns $10,000.00 into $15,000.00 over 3 years
Return on what you put in…
ROI = (Return − Cost) ÷ Cost × 100
Return − Cost = $15,000.00 − $10,000.00 = $5,000.00
$5,000.00 ÷ $10,000.00 = 0.5000
ROI = 50.00%
Formula — written step by step
10,000 in, 15,000 out, over 3 years…
ROI = (Return − Cost) ÷ Cost × 100
Return − Cost = 15,000 − 10,000 = 5,000
5,000 ÷ 10,000 = 0.5
Annualised: (15,000 ÷ 10,000)^(1÷3) = 1.144714
ROI = 50% · 14.47% a year
Cost is everything you put in, return everything you got back. The simple figure ignores time completely — the same 50% earned over three years is 14.47% a year, which is the number to compare against any other investment.
A worked example
A rental property held for five years
- Purchase price and costs
- 200,000
- Sale proceeds
- 260,000
- Holding period
- 5 years
- Gain = 260,000 − 200,000 = 60,000
- ROI = 60,000 ÷ 200,000 = 0.30
- Annualised = (260,000 ÷ 200,000)^(1÷5) − 1
- = 1.3^0.2 − 1 = 0.053874
ROI = 30% in total, or 5.39% a year
The 30% headline sounds strong until it is spread over five years. At 5.39% a year it barely beats a deposit account — and that is before agent fees, stamp duty and maintenance, none of which are in the purchase price above.
How to use this calculator
- Enter everything the investment cost you, including fees and charges — leaving them out is the most common way ROI gets flattered.
- Enter what you got back: the sale proceeds, or the current value if you still hold it.
- Add the holding period to see the annualised return, which is the only figure comparable across investments of different lengths.
- Compare the annualised number, not the headline, against what the money could have earned elsewhere.
What ROI actually measures
Return on investment expresses profit as a percentage of what was put in: subtract the cost from the return, divide by the cost, multiply by a hundred. Its appeal is that it compares investments of wildly different sizes on one scale — a 40% return is a 40% return whether the sum was a thousand or a million.
Its weakness is that it says nothing about time. Doubling your money is excellent in two years and mediocre in twenty, yet both are a 100% ROI. Whenever a holding period is known, the annualised figure is the honest one, and it is what this calculator shows alongside the headline.
The costs that quietly disappear
Most overstated ROI figures come from an understated cost. Brokerage and transaction fees, stamp duty, legal costs, renovation, the interest on money borrowed to fund the purchase, and the hours of unpaid work put into an asset are all part of what the investment cost, and all are routinely omitted.
Tax is the other common omission. A return taxed at 30% on the gain is not the return you keep. If you are comparing an investment against a tax-sheltered alternative, compare both after tax or the comparison is meaningless.
When ROI is the wrong tool
ROI assumes one sum in at the start and one sum out at the end. As soon as money moves in and out part-way through — additional contributions, dividends taken as income, partial sales — the arithmetic no longer describes what happened, and the internal rate of return is the correct measure instead.
It also ignores risk entirely. A 12% return from government bonds and a 12% return from a single speculative stock are not equivalent outcomes, and no percentage on its own will tell you which one you should have preferred.
Formula & methodology
What this calculator assumes
- Simple ROI ignores time entirely: a 50% return earned over one year and over ten produce the same figure, which is why the annualised row is shown whenever a holding period is given.
- Assumes a single outlay at the start and a single value at the end. Where money is added or withdrawn part-way through, IRR is the correct measure.
- Excludes brokerage, taxes, management fees and inflation. A nominal return of 8% in a year of 6% inflation is closer to 2% in real terms.
Sources
- Brealey, Myers & Allen, Principles of Corporate Finance, 13th edition, McGraw-Hill, 2019 — measures of investment return.
The same 50% return, over different periods
| Holding period | Simple ROI | Annualised |
|---|---|---|
| 1 year | 50% | 50.00% |
| 3 years | 50% | 14.47% |
| 5 years | 50% | 8.45% |
| 10 years | 50% | 4.14% |
| 20 years | 50% | 2.05% |
Every row describes the identical gain. This is why a simple ROI quoted without a time period tells you almost nothing.
Frequently asked questions
What is a good ROI?
There is no universal figure, because it depends on risk and time. As a reference point, broad stock-market indices have returned roughly 7–10% a year over long periods before inflation. Judge an annualised ROI against what you could have earned elsewhere at similar risk, not against zero.
Should I use ROI or CAGR?
They answer different questions from different inputs. ROI starts from a cost and a return; CAGR starts from a beginning and ending value. The annualised ROI shown here is arithmetically the same thing as CAGR.
Can ROI be negative?
Yes. If the return is less than the cost, the figure is negative and represents the percentage of your capital lost. The annualised row is not shown for a loss, because the root of a negative ratio has no meaningful real value.
Does this account for inflation?
No — the result is a nominal return. To get the real return, subtract the inflation rate over the same period. A 6% annualised return during 4% inflation preserves only about 2% of purchasing power.