ROI Calculator
Calculate return on investment, gain/loss, and annualized CAGR.
ROI = (Final − Initial) / Initial × 100. CAGR = (Final/Initial)^(1/years) − 1.
This ROI calculator returns the total return on an investment, the gain or loss in dollars, and the annualized return (CAGR) so investments held for different lengths of time can be compared.
ROI is simple and easy to misread. A 45% return over three years is not 15% a year — it is 13.2% compounded, and that difference compounds again when you compare it against anything else. Below: both formulas, when to use each, and what ROI quietly leaves out.
How to calculate ROI
- Gain = final value − initial value. $14,500 − $10,000 = $4,500.
- ROI = gain / initial × 100 = 4,500 / 10,000 × 100 = 45%.
- Years held = 3.
- CAGR = (final / initial)^(1/years) − 1 = 1.45^(1/3) − 1 = 13.2% a year.
- Check: 10,000 × 1.132^3 = $14,500, which returns the original figures.
Example
Invest $10,000 and sell for $14,500 after three years: ROI is 45%, and the annualized return is 13.2%. The simple average of 45% / 3 = 15% overstates the yearly growth, because it ignores compounding — at a true 15% a year the investment would be worth $15,209.
ROI formula
ROI = (final − initial) / initial × 100. CAGR = (final / initial)^(1/years) − 1. Annualized simple return = ROI / years.
How to use this calculator
- Enter what you paid, including fees if you want the net return.
- Enter what it is worth now, or what you sold it for.
- Set the holding period in years. Six months is 0.5.
- Read ROI for the total picture and CAGR for the annual comparison — CAGR is the number to use against a benchmark.
ROI vs. CAGR
ROI measures the whole holding period; CAGR measures the constant yearly rate that would produce the same result. A 100% ROI is excellent over ten years (7.2% a year) and extraordinary over one. Whenever two investments have different holding periods, compare CAGR.
What to include in the cost
Purchase fees, commissions, closing costs, and any capital spent on the investment belong in the initial value. Sale fees and taxes belong in the final value if you want an after-cost number. Leaving them out is the most common reason a personal ROI looks better than the account statement.
When ROI is the wrong tool
If money went in or out during the holding period, simple ROI cannot handle it. A rental property with monthly income, or a portfolio with contributions, needs IRR or XIRR, which account for the timing of each cash flow. ROI also ignores risk: a 40% return on a speculative stock and a 40% return on a bond fund are not the same achievement.
What this calculator leaves out
Taxes, inflation, and volatility along the way. A 45% nominal return over three years with 3% inflation is about 35% in real terms, and a portfolio that swings 30% between entry and exit may not have been holdable for the full period.
Common mistakes
- Dividing total ROI by years. It overstates annual growth and is not comparable across periods.
- Ignoring fees and taxes, which can remove a third of a short-term gain.
- Comparing ROI figures with different holding periods without annualizing.
FAQ
How do I calculate ROI?
(Final value − initial value) / initial value × 100. A $10,000 investment sold for $14,500 returns 45%.
What is a good ROI?
It depends on the asset and the risk. Broad stock market returns have averaged about 7% a year after inflation; a small business or a rental property should clear that comfortably to justify the effort and illiquidity.
What is the difference between ROI and CAGR?
ROI is the total gain over the period; CAGR is the equivalent annual rate. 45% over three years is 13.2% CAGR, not 15%.
How do I annualize an ROI?
CAGR = (1 + ROI/100)^(1/years) − 1. For 45% over three years: 1.45^(1/3) − 1 = 13.2%.
Should ROI include fees?
For a realistic number, yes. Add purchase costs to the initial value and subtract sale costs from the final value.
Can ROI be negative?
Yes. If the final value is below the initial value the formula returns a negative percentage — a loss. A $10,000 investment worth $8,000 has an ROI of −20%.
When should I use IRR instead of ROI?
When cash flows in or out during the holding period. IRR accounts for the timing of each one; simple ROI assumes a single investment and a single exit.