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ROI Calculator

Enter what you invested, what it is worth now (or what you received) and how long you held it. The calculator shows the profit, the ROI as a percentage and the annualised ROI. An investment of $10,000 that becomes $13,000 in 3 years has an ROI of 30%, or 9.14% a year.

Your numbers

Results

Return on investment

30%

Annualised return

9.14%

Profit
$3,000.00
Show the working
  1. ROI($13,000.00 − $10,000.00) ÷ $10,000.00 = 30%
  2. Annualised(1 + 30%)^(1 ÷ 3) − 1 = 9.14%
Paper and orientation

How to use the ROI calculator

  1. Enter the amount invested, including fees.
  2. Enter the final value or the total you received.
  3. Enter the years held to see the annualised ROI.
  4. Read the profit, ROI and annualised ROI.

Formulas

  • Profit = final value − cost.
  • ROI = profit ÷ cost.
  • Annualised ROI = (final value ÷ cost)^(1 ÷ years) − 1.

Worked example

You invest $10,000 and three years later it is worth $13,000.

  • Profit: $3,000.
  • ROI: 30%.
  • Annualised ROI: 9.14% a year.

If the same 30% had taken 6 years, the annualised ROI would be about 4.5%.

ROI for business decisions

ROI is often used to compare projects: new equipment, a marketing campaign or software. Include all costs (purchase, installation, training, running costs) and all benefits (extra revenue, savings). For projects with cash flows over several years, the time value of money matters; the CAGR and XIRR calculator handles dated cash flows.

Tips and common mistakes

  • Include all costs; leaving out fees overstates ROI.
  • Annualise before comparing investments held for different periods.
  • Consider risk; a higher ROI may come with higher risk.
  • Account for inflation to see the real return.
  • Use XIRR if you added or withdrew money during the period.

ROI versus other measures

ROI is simple and widely understood, but it ignores timing within the period and the size of the investment. A 50% ROI on $100 is less useful than a 10% ROI on $100,000. Look at the profit in money as well as the percentage, and use annualised figures to compare across time.

Worked business example

A small business buys equipment for $8,000 and expects it to save $3,000 a year in labour for four years. Total benefit is $12,000, so profit is $4,000 and ROI is 50% over four years, about 10.7% a year when annualised on the same basis. Because the savings arrive gradually rather than all at the end, the true annual return is higher still; enter the cash flows by date in the XIRR calculator for a more accurate figure.

Common ROI pitfalls

  • Ignoring opportunity cost: money tied up in one investment can’t earn elsewhere.
  • Using gross instead of net figures: subtract taxes and fees where possible.
  • Comparing different risk levels: a guaranteed 5% and a risky 8% are not directly comparable.
  • Cherry-picking dates: choosing a favourable start or end point can make returns look better than they were.

Limitations

The calculator assumes a single investment at the start and a single value at the end. Interim cash flows, taxes and risk are not included.

Frequently asked questions

How is ROI calculated?

ROI = (final value − cost) ÷ cost. $10,000 that becomes $13,000 is a 30% ROI.

What is annualised ROI?

The equivalent yearly rate: (final ÷ cost)^(1 ÷ years) − 1. A 30% gain over 3 years is 9.14% a year.

Why annualise?

A 30% return over 3 years is very different from 30% over 10 years. Annualising lets you compare investments held for different periods.

What should I include in the cost?

Everything you paid: the purchase price, fees, commissions and any money you added. Include income received in the final value.

Can ROI be negative?

Yes. If the final value is below the cost, ROI is negative and shows a loss.

Sources