ROI Calculator guide
Calculate return on investment for stocks, real estate, marketing campaigns, equipment, or side projects. Add how long you held it to see the annualized ROI, so investments of different lengths compare fairly.
The ROI formulas used here
Net profit = amount returned − amount invested. ROI = net profit ÷ amount invested × 100. Multiple = amount returned ÷ amount invested, the number investors call MOIC (multiple on invested capital). A 2.00x multiple is a 100 percent ROI.
Annualized ROI = (amount returned ÷ amount invested)^(1 ÷ years) − 1. This is the compound annual growth rate, or CAGR. It answers the question: what steady yearly return would have produced the same result? It needs a positive investment, a positive final value, and more than zero years, otherwise the tile shows a dash.
Why annualized ROI matters
Plain ROI ignores time, which makes it easy to fool yourself. Investment A returned 50 percent over 5 years. Investment B returned 30 percent over 2 years. A looks better until you annualize: A is 8.45 percent a year, B is 14.02 percent a year. B grew your money almost twice as fast.
Do not annualize by dividing. A 35 percent gain over 3 years is not 11.67 percent a year. Compounding means you need only 10.52 percent a year: $10,000 × 1.1052³ ≈ $13,500. Dividing overstates the yearly rate every time. For holding periods under a year, annualizing can produce eye-popping numbers from small wins; a 5 percent gain in one month annualizes to about 80 percent, which you almost certainly cannot repeat twelve times.
Worked example: a house flip
Purchase price $250,000, renovation $40,000, closing and holding costs $15,000. Total invested: $305,000. It sells for $360,000, but agent commissions and seller closing costs run about 6 percent, $21,600. Amount returned: $338,400.
Net profit $33,400. ROI = 33,400 ÷ 305,000 = 10.95 percent. The flip took 9 months, 0.75 years, so annualized ROI is (338,400 ÷ 305,000)^(1 ÷ 0.75) − 1 = 14.86 percent. That is respectable, but it is before income tax on a short-term gain and before valuing the hundreds of hours you put in. Many flips that look profitable on a napkin fall apart once selling costs are included.
If you financed it, ROI on your cash is different. Put $80,000 of your own money in and borrow the rest, and the same profit, minus interest, is a much larger percentage of your cash. Leverage magnifies losses the same way.
ROI for marketing and business decisions
For a campaign, amount invested is the full cost: ad spend, creative, agency fees, and tools. Amount returned should be gross profit from the sales it drove, not revenue. $4,000 spent that generates $12,000 of sales at a 40 percent gross margin produces $4,800 of gross profit. ROI is ($4,800 − $4,000) ÷ $4,000 = 20 percent, far less exciting than the 3x revenue multiple suggests.
For equipment or software, amount returned is the money saved or earned over its useful life. A $6,000 machine that saves $250 a month in labor pays back in 24 months, and over 4 years returns $12,000 for a 100 percent ROI, or about 18.9 percent annualized.
Common ROI mistakes
Leaving out costs. Brokerage fees, closing costs, maintenance, software subscriptions, and your own time all count.
Ignoring the alternative. A 6 percent ROI over a year sounds fine until you notice a high-yield savings account paid about 4 percent risk-free. What matters is return over what you could have earned elsewhere at similar risk.
Comparing nominal and real returns. ROI is nominal. Over long periods, subtract inflation, around 2 to 3 percent a year historically in the US, to see real growth in purchasing power.
Cherry-picking the time window. Measuring from a market low to a high flatters any investment. Use the actual dates you put money in and took it out.
Forgetting taxes on the gain. In the US, investments held more than a year are taxed at long-term capital gains rates of 0, 15, or 20 percent depending on income, while gains on assets held a year or less are taxed as ordinary income. A 15 percent ROI and a 12 percent after-tax ROI are very different results, so calculate both when the holding period is close to the one-year line.
How we calculate: sources
Frequently asked questions
How do you calculate ROI?
ROI = (amount returned − amount invested) ÷ amount invested × 100. Invest $10,000, get back $13,500, and ROI is $3,500 ÷ $10,000 = 35%.
What is annualized ROI?
The yearly compound rate that turns your investment into the final value: (final ÷ initial)^(1 ÷ years) − 1. A 35% gain over 3 years is 10.52% a year, not 11.67%, because returns compound.
What is a good ROI?
It depends on risk and time. The S&P 500 has averaged roughly 10% a year before inflation over the long run, so many investors use that as the bar for stock-like risk. A marketing campaign is often judged on return per dollar of ad spend instead.
Can ROI be negative?
Yes. If you get back less than you put in, ROI is negative. Losing $2,000 on a $10,000 investment is −20%. The worst possible ROI is −100%, a total loss.
What is the difference between ROI and ROAS?
ROAS is revenue divided by ad spend. ROI subtracts all costs, including product cost, from revenue first. $5,000 of sales from $1,000 of ads is a 5x ROAS, but if the products cost $2,500, ROI is ($5,000 − $2,500 − $1,000) ÷ $3,500 ≈ 43%.
Should I include fees and taxes?
Yes. Add purchase fees, commissions, and closing costs to the amount invested, and subtract selling costs from the amount returned. Otherwise ROI looks better than what actually landed in your account.
Does ROI account for inflation?
No. A 25% ROI over 10 years is well below inflation at a typical 2 to 3% a year. Use the inflation calculator to see what the final amount is worth in today's dollars.
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How long does it take to double my money?
Use the Rule of 72: divide 72 by your annual return. At 10.52% a year, money doubles in about 6.8 years. The exact figure is ln(2) ÷ ln(1.1052), about 6.9 years.
What is the difference between ROI and IRR?
ROI and annualized ROI assume one investment in and one payout out. IRR handles multiple cash flows at different times, such as monthly rent and a later sale. For irregular deposits and withdrawals, use a spreadsheet XIRR function.