ROI Calculator
Calculate the return on investment (ROI) for any investment. See both total ROI and annualized returns.
Understanding ROI
Return on Investment (ROI) measures the profitability of an investment. The basic formula is: ROI = (Net Profit / Cost of Investment) × 100.
Annualized ROI
Annualized ROI accounts for the time period of the investment, allowing you to compare investments of different durations on an equal basis. A 20% ROI over 2 years is very different from a 20% ROI over 10 years.
Frequently Asked Questions
What is ROI (Return on Investment)?
ROI is a performance measure used to evaluate the efficiency of an investment. It is calculated as: ROI = (Net Profit / Cost of Investment) × 100. A positive ROI means the investment gained value; negative means it lost value.
What is a good ROI?
A good ROI depends on the investment type and risk level. Stock market investments historically return 7-10% annually. Real estate typically returns 8-12%. Higher-risk investments should offer higher potential returns to compensate.
What is annualized ROI?
Annualized ROI adjusts returns for the time period, allowing fair comparison between investments of different durations. For example, 20% ROI over 2 years is about 9.5% annualized, while 20% over 5 years is about 3.7% annualized.
What are the limitations of ROI?
ROI does not account for time value of money, risk, or opportunity cost. A 50% ROI over 10 years may be worse than 20% over 2 years. Use annualized ROI and consider other metrics like IRR for comprehensive analysis.
Disclaimer
This calculator is for informational purposes only and should not be considered financial advice. Consult with a qualified financial professional before making any financial decisions.