ROI calculator
Total return tells you how much you made. Annualized return tells you whether that was a good result. This calculator shows both, because comparing a three-year investment with a ten-year one on total return alone is misleading.
Uses a standard published formula, explained below. Everything is calculated in your browser, and nothing you enter is sent to a server. This is not financial advice.
The investment
Total return on investment
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Net profit or loss
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Annualized return
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Money multiple
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Show the working
—Why annualized return matters most
A 50% total return sounds excellent, and over one year it would be. Over fifteen years, however, it works out to only about 2.7% a year, which is less than many savings accounts and probably below inflation.
Total ROI ignores time completely, so it cannot be used to compare investments held for different periods. Annualized return, also called the compound annual growth rate or CAGR, turns any holding period into a yearly rate. That gives you a fair basis for comparison.
The formula is:
Annualized return = (Final value ÷ Amount invested)1/years − 1
If you leave the holding period blank, the calculator shows total ROI only. That is the right measure for a one-off deal, such as buying and reselling an item.
What is a good ROI?
It depends on what you gave up and how much risk you took, but a few benchmarks help.
Over long periods, broad stock markets have historically returned around 7% to 10% a year before inflation. That is a sensible benchmark for most investments, because anyone can get close to it with a low-cost index fund and no special effort. An investment that returns 6% a year while needing your time and attention is, in effect, doing worse than doing nothing.
Business investments are usually held to a higher standard, because they carry more risk and take up your time. Marketing spending is often expected to return several times its cost, while equipment purchases are more often judged by how quickly they pay for themselves.
What ROI leaves out
Risk. Two investments that each return 12% a year are not equal if one is a government bond and the other is a single startup. ROI says nothing about how differently things could have turned out.
Money added or taken out along the way. This calculator compares two points in time. If you added money partway through, or took out dividends, the simple calculation will misstate your return. In that case you need the internal rate of return, which takes the timing of each payment into account.
Opportunity cost. Money tied up in one investment could not be used for anything else, so the real comparison is with your next best option, not with zero.
Inflation and tax. A 7% return during 5% inflation is only a 2% real gain before tax, and less after it. Over long periods, the gap between nominal and real returns is the difference between having more money and actually being better off.
Not financial advice. ROI looks back at a single investment and says nothing about what will happen next. Past performance does not predict future results.
Frequently asked questions
What is a good ROI?
There is no single figure. Long-term stock market returns of around 7% to 10% a year are a reasonable benchmark, because they can be earned with a simple index fund. An investment that takes your time or carries more risk should beat that to be worthwhile.
How is ROI calculated?
Divide your net profit by the amount you invested and multiply by 100. To annualize it, divide the final value by the amount invested, raise the result to the power of one over the number of years, and subtract one.
What is the difference between ROI and annualized return?
ROI is your total gain, whatever the length of time. Annualized return turns that gain into a yearly rate, which is the only fair way to compare investments held for different periods.
What is the difference between ROI and profit margin?
ROI compares profit with the money you put in. Profit margin compares profit with your sales revenue. A business can have a healthy margin and still a poor ROI if it needed a lot of capital to earn its revenue.
Can ROI be negative?
Yes. If the final value is less than you invested, both the profit and the ROI are negative, and the annualized figure shows the yearly rate of loss.
Should I use nominal or inflation-adjusted figures?
Nominal figures are fine for comparing investments, as long as you use them consistently. To judge whether you are genuinely better off, subtract inflation from the annualized return.