ROI Calculator

How to use the calculator

1. Amount invested: what you originally paid, for example the purchase price of shares, equipment or a project budget.
2. Amount returned: what the investment is worth or brought in at the end: sale proceeds, final account value, or the gross profit a project generated.
3. Extra costs: optional. Commissions, fees, closing costs, repairs or anything else you paid on top of the investment.
4. Holding period: optional, in years (decimals allowed, so 18 months is 1.5). When you fill it in, the annualized ROI appears.

How ROI is calculated

The calculator first adds up the total cost, then compares it with what came back:

• Total cost = amount invested + extra costs
• Net gain = amount returned − total cost
• ROI = net gain ÷ total cost × 100
• Multiple = amount returned ÷ total cost

A multiple of 1.00 means you broke even; 1.50 means every dollar of cost came back as $1.50. A negative ROI means you lost money.

Plain ROI ignores time: 35% earned in two years and 35% earned in ten years look identical. The annualized ROI fixes that by finding the constant yearly rate that would turn the total cost into the amount returned over the holding period:

Annualized ROI = multiple^(1 ÷ years) − 1

This is the same idea as a compound annual growth rate (CAGR). It assumes a single investment at the start and a single amount at the end; if you added or withdrew money along the way, the figure is only an approximation. Taxes and inflation are not included.

Worked examples

1. Same ROI, different speed

You invest $10,000 and get back $13,500. The ROI is 35.00%, a net gain of $3,500 and a multiple of 1.35. If that took 2 years, the annualized ROI is 16.19%; if it took 5 years, only 6.19% a year.

2. Fees lower the return

Same investment, but you paid $250 in commissions and fees. Total cost becomes $10,250, the net gain drops to $3,250 and the ROI to 31.71%. Over 2 years that is 14.76% annualized instead of 16.19%.

3. A losing investment

You buy $5,000 of an asset, pay $50 in costs and sell 18 months later for $4,200. The net gain is −$850, the ROI −16.83%, the multiple 0.83 and the annualized ROI −11.56%.

How to read your results

Use annualized ROI to compare investments held for different lengths of time, and compare it with a benchmark such as a savings rate or a broad index fund over the same period. Be careful with very short periods: earning 15% in six months annualizes to 32.25%, a rate that is rarely sustainable.

ROI says nothing about risk. Two investments with the same ROI can carry very different chances of loss. It is also a nominal figure: subtracting inflation gives a rough idea of your real return, and taxes reduce what you actually keep.