ROI Calculator

How to use the ROI calculator

Fill in three boxes:

• Initial investment: the money you put in at the start.
• Final return: the total value you ended up with, which includes your original amount. Sell something you bought for $1,000 at $1,500 and the final return is $1,500, not $500.
• Years till return: how long the money was tied up. Fractions are allowed, so 18 months is 1.5.

The calculator shows the investment gain in dollars, the ROI as a percentage of what you invested and the annualized ROI, the steady yearly rate that would have produced the same result. If you enter zero years, the annualized figure is left out because it cannot be defined.

ROI formula

Return on investment measures how much you gained relative to how much you spent.

gain = final return − initial investment

ROI % = gain ÷ initial investment × 100

A positive result means a profit and a negative one a loss. An ROI of 0% means you got exactly your money back. The initial investment must be above zero, since the formula divides by it.

Annualized ROI

Total ROI ignores time. A 50% return after one year is far better than 50% after ten, yet the two share the same ROI. Annualizing converts the result into a compound yearly rate so that different holding periods can be compared on equal terms.

annualized ROI % = ((final return ÷ initial investment)^{1 ÷ years} − 1) × 100

Because it compounds, the annualized figure is not simply the total ROI divided by the number of years. A 50% total return over three years annualizes to about 14.47%, not 16.67%: growing at 14.47% a year for three years gives 1.1447³ ≈ 1.5.

When the holding period is a year, annualized ROI and ROI are the same number. For periods shorter than a year, annualizing scales the return up, so the figure can look enormous. A 50% gain in three months annualizes to 406.25%, which assumes you could repeat it every quarter.

Worked examples

Equipment purchase. A workshop spends $8,000 on a machine that returns $11,000 in savings over four years. Gain: $3,000. ROI: 3,000 ÷ 8,000 = 37.5%. Annualized ROI: (11,000 ÷ 8,000)^1/4 − 1 ≈ 8.29% a year.

Share sale. Shares bought for $2,500 are sold after 18 months for $2,980. Gain: $480. ROI: 19.2%. With 1.5 years held, annualized ROI is (2,980 ÷ 2,500)^1/1.5 − 1 ≈ 12.42%.

Comparing two projects. Project A returns 60% over five years and project B returns 40% over two. Taken at face value, A looks better. Annualized, A earns 1.6^1/5 − 1 ≈ 9.86% a year and B earns 1.4^1/2 − 1 ≈ 18.32% a year, so B is the stronger performer per year.

A loss. Putting in $1,000 and getting back $800 after two years gives a gain of −$200, an ROI of −20% and an annualized ROI of about −10.56%.

What ROI does not tell you

• Risk. Two investments with the same ROI can differ widely in how likely they were to lose money.
• Costs. Fees, taxes and maintenance reduce the true return. Subtract them from the final return, or add them to the investment, before calculating.
• Timing of cash flows. This calculator assumes one amount in and one amount out. If money goes in or comes out at several dates, you need an internal-rate-of-return method instead.
• Inflation. A nominal ROI of 5% is a loss in real terms when prices rise faster than that.
• Scale. A high ROI on a small amount may add less value than a modest ROI on a large one.

For related views of profitability, see the return on equity, return on assets, return on sales and ROIC calculators, and the break-even calculator for how soon a project covers its costs.

Results are mathematical estimates for general information and are not investment advice. Past returns do not guarantee future results. See our disclaimer.