How to use the roi calculator
- 1Enter how much you put in and how much you got back or what it is worth now.
- 2Add any extra costs such as fees or commission.
- 3Enter how many years you held it to see the yearly return.
- 4Compare the ROI and annualized ROI.
The ROI formula
ROI = (amount returned − amount invested) ÷ amount invested × 100
Investing 10,000 and getting back 13,500 is a gain of 3,500, an ROI of 35%.
Include costs such as fees, commission and taxes paid in the amount invested, otherwise ROI looks better than it really was.
Why annualized ROI matters
A 35% return over three years is very different from 35% in one year. Annualized ROI (also called compound annual growth rate, or CAGR) converts the total into an equivalent yearly rate:
annualized ROI = (returned ÷ invested)^(1 ÷ years) − 1
35% over three years works out to about 10.5% a year. This makes investments of different lengths comparable.
Limits
ROI ignores risk and the timing of cash flows in between. For investments with many deposits and withdrawals, a money-weighted return gives a fairer picture.
Frequently asked questions
What is a good ROI?
It depends on the risk and the alternatives. Compare it with what the same money could have earned elsewhere, such as a savings account or an index fund.
Can ROI be negative?
Yes. If you got back less than you put in, ROI is negative, showing a loss.
What is the difference between ROI and annualized ROI?
ROI is the total return over the whole period. Annualized ROI spreads it into an equivalent return per year.
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