Comprehensive Guide
Learn more in our Investing Guide.
How it works
Return on investment is the most universal yardstick in finance: the gain divided by what you put in, as a percentage. Invest $50,000 and end with $80,000 and the total ROI is 60%. That simplicity is the point and the trap — a 60% return over four years and over fourteen are the same number, which is why the calculator also reports the annualized ROI, the equivalent per-year rate that makes any two investments comparable. $50,000 to $80,000 in four years annualizes to about 12.5%; over fourteen years the same 60% is barely 3.4%. Getting the inputs honest matters more than the arithmetic. The invested figure must include every cost — purchase commissions, closing costs, renovation, fees — and the final figure must include every rupee or dollar of income received along the way. ROI understated at the start flatters the result forever. And remember what ROI does not say: nothing about risk, nothing about the path between the endpoints. Two investments with identical returns can have very different probabilities of repeating, so read ROI alongside how bumpy the ride was.Formula
ROI = (final - invested) / invested x 100 | annualized = (final/invested)^(1/years) - 1
Tips
- Compare investments on the annualized figure — total ROI ignores time.
- Include every cost in the invested amount, or the result flatters you forever.
- Count all income received in the final value, not just the sale price.
- ROI says nothing about risk — pair it with how volatile the path was.
- A negative ROI is information: compare it against the benchmark before blaming the idea.
Frequently asked questions
How do I calculate ROI?
Subtract the amount invested from the final value, divide by the amount invested, and multiply by 100. $50,000 growing to $80,000 is a 60% total ROI. Include all costs in the invested figure and all income in the final figure for an honest number.
What is the difference between ROI and annualized ROI?
Total ROI is the whole percentage gain regardless of time; annualized ROI converts it to an equivalent per-year rate. A 60% gain over 4 years annualizes to about 12.5%, but over 14 years to barely 3.4% — the annualized figure is the only fair comparison.
What is a good ROI?
It depends on the investment and the time taken, which is why annualized ROI is the figure to judge. Against the stock market's long-run ~10% a year, an annualized ROI above that is strong. Always compare like for like on time and risk.
Should costs be included in ROI?
Yes — every cost: purchase commissions, closing costs, renovation, ongoing fees. Leaving them out understates the invested amount and overstates the return forever. The same applies to income: include dividends or rent received, not just the sale price.
What does ROI not tell you?
Risk and the path. Two investments with identical ROI can have very different probabilities of repeating and very different rides between the endpoints. Read ROI alongside volatility and the worst drawdown, never alone.