How to use this ROI calculator
- Amount invested — everything you paid to make the investment, including purchase fees and commissions.
- Amount returned — what you got back: the sale proceeds or current value after selling costs, plus any dividends, interest or rent you collected along the way.
- Investment length — optional. Enter how many years you held the investment to get the annualized return.
The ROI formula
ROI = (amount returned − amount invested) ÷ amount invested × 100
Example: you buy shares for $10,000, collect $400 in dividends and sell for $14,600. The amount returned is $15,000, so ROI = (15,000 − 10,000) ÷ 10,000 × 100 = 50%. A negative result means a loss: selling for $8,000 gives an ROI of −20%.
Annualized ROI (CAGR)
A 50% return is excellent over one year and modest over ten. Annualized ROI — also called the compound annual growth rate, or CAGR — converts any total return into an equivalent steady yearly rate:
Annualized ROI = (amount returned ÷ amount invested)1 / years − 1
For the $10,000 that became $15,000 over 3 years: 1.51/3 − 1 = 14.47% a year. Simply dividing 50% by 3 gives 16.67%, which overstates the return because it ignores compounding — 14.47% compounded for three years is exactly 50%.
The same 50% total ROI over different holding periods:
| Years held | Total ROI | Annualized ROI |
|---|---|---|
| 1 | 50% | 50% |
| 2 | 50% | 22.47% |
| 3 | 50% | 14.47% |
| 5 | 50% | 8.45% |
| 10 | 50% | 4.14% |
Annualized figures are what you should compare against other options, such as a savings account's APY or an index fund's long-run average.
What to include for an honest ROI
- All costs. Commissions, closing costs, account fees and, for property, repairs, insurance and property taxes.
- All income. Dividends, interest and rental income count toward the amount returned.
- Taxes. For an after-tax ROI, subtract the tax you owe on the gain from the amount returned.
- Inflation. A 3% annualized return during 3% inflation leaves your purchasing power unchanged.
ROI for business decisions
ROI is just as useful for projects as for investments. If a $2,000 ad campaign brings in sales with $5,000 of gross profit, its ROI is (5,000 − 2,000) ÷ 2,000 = 150%. Use profit, not revenue — counting the full sales amount ignores the cost of the goods sold. Our profit margin calculator helps you find that profit, and the break-even calculator shows how much you must sell to recover a cost.
Limitations of ROI
- It ignores the timing of extra deposits or withdrawals. If you added money along the way, use the internal rate of return — the XIRR function in Excel or Google Sheets handles irregular cash flows.
- It says nothing about risk. Two investments with the same ROI can have very different chances of losing money.
- Past returns do not predict future returns. Results here are calculations, not investment advice.
Frequently asked questions
What is a good ROI?
It depends on the risk and the time involved. A useful test is to compare your annualized ROI with what a low-risk option, such as a high-yield savings account or Treasury bills, paid over the same period. A riskier investment should beat that by a comfortable margin.
Can ROI be negative?
Yes. A negative ROI means you got back less than you put in. Without borrowed money, the worst case is −100%, a total loss.
What is the difference between ROI and annualized ROI?
ROI is the total return over the whole holding period. Annualized ROI spreads that return into an equivalent yearly rate with compounding, so investments held for different lengths can be compared fairly.
How do I calculate ROI with several deposits over time?
Basic ROI cannot account for when each deposit was made. Use the internal rate of return instead — list each cash flow with its date and apply the XIRR function in a spreadsheet.
How is ROI different from profit margin?
ROI compares profit with the money invested. Profit margin compares profit with revenue. A product can have a thin margin but a high ROI if it sells quickly with little capital tied up.
Last updated: October 8, 2026