ROI Calculator
It measures what an investment returned, both as a plain percentage and as an annualized rate that makes different holding periods comparable.
Return on investment
+50.00%
Net gain
$5,000
Total ROI
50.00%
Annualized
14.47%
Multiple
1.50×
ROI ÷ years
16.67%
Years held
3.0
Dividing total ROI by the years would give 16.67% — overstating the real annual rate by 2.20 points, because it ignores compounding.
What it calculates
It measures what an investment returned, both as a plain percentage and as an annualized rate that makes different holding periods comparable.
Why it matters
A 50% return sounds identical whether it took one year or ten, but the annualized figures are 50% and 4.1%. Only the annualized number compares fairly.
Who it's for
Investors comparing holdings, business owners assessing a project, and marketers judging campaign spend.
Formula
- Vi
- Initial investment or cost
- Vf
- Final value or total return
- n
- Holding period in years
Worked example
$10,000 grows to $15,000 over 3 years
- 1Gain = 15,000 − 10,000 = 5,000
- 2ROI = 5,000 ÷ 10,000 × 100 = 50%
- 3Annualized = (1.5)^(1/3) − 1
50% total, or 14.47% a year — not 16.7%
How the roi calculator works
Simple ROI is gain divided by cost. Annualizing it requires the geometric mean, not division by the number of years, because returns compound: earning 14.47% three times over turns 1.0 into 1.5. Dividing 50% by 3 would give 16.7%, which overstates the result.
Simple ROI is gain divided by cost. Annualizing it needs the geometric mean, not division by the number of years, because returns compound on each other.
That difference is not cosmetic: a 50% return over three years is 14.47% a year, not the 16.67% you get by dividing.
Common mistakes
- Dividing total ROI by the number of years instead of taking the geometric rate.
- Ignoring fees, taxes and transaction costs, which all come out of the gain.
- Comparing an annualized figure from one investment to a total-return figure from another.
Tips and best practice
- Always compare investments on annualized return, never on total return.
- For a business project, include the opportunity cost of the capital in the initial figure.
Frequently asked questions
How do you calculate ROI?
ROI = (final value − initial cost) ÷ initial cost × 100. A $10,000 investment worth $15,000 has returned 50%.
What is annualized ROI?
The constant yearly rate that would produce the same result through compounding: (final ÷ initial)^(1 ÷ years) − 1. It is the only fair way to compare investments held for different lengths of time.
Why is annualized return lower than ROI divided by years?
Because returns compound. Each year's growth builds on the last, so a smaller yearly rate reaches the same total.
What counts as a good ROI?
It depends entirely on risk and alternatives. The long-run global equity market has returned roughly 7–10% a year nominally, which is the usual benchmark for a risky investment.
Related calculators
Methodology & trust
- Formula source
- Standard ROI and compound annual growth rate (CAGR) definitions.
- Last updated
- 2026-07-28
- Privacy
- Every calculation runs in your browser. No inputs are sent to a server or stored.
- Accessibility
- Keyboard navigable, labeled inputs and WCAG AA color contrast.