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The Calculator Corner

ROI Calculator

What did the investment actually return?

Style

ROI

25%

  • Your investment$10,000.0080%
  • Fees & costs$0.000%
  • Net gain$2,500.0020%
  • Amount lost$0.000%
Net gain
$2,500.00
Annualized ROI
11.79%
Return multiple
1.25×
Holding period
2 years

What ROI actually measures

Return on investment is one ratio: what you made divided by what it cost you. Put in $10,000, get back $12,500, and the $2,500 gain is 25% of what you risked. That is the whole formula, and its simplicity is exactly why it travels — you can compare a rental property, a stock, and a marketing campaign on the same number.

The simplicity is also its trap. A 25% return means something very different over eight months than over eight years, and plain ROI cannot tell them apart. That is what the annualized figure below it is for.

ROI vs annualized ROI

Plain ROI is a total: everything the investment returned, over its whole life, as a percentage of its cost. Annualized ROI restates that as a yearly rate — the constant return that, compounded over the same period, would have produced the same result.

A 25% total return over two years annualizes to about 11.8% a year, not 12.5%, because the second year's growth compounds on the first year's. Over ten years the same 25% total is barely 2.3% a year, which is the honest way to compare it against a savings account. Whenever you are comparing two investments held for different lengths of time, the annualized figure is the one to use.

Counting the costs

The most common way to get an ROI wrong is to leave money out of the denominator. Brokerage commissions, platform fees, stamp duty, closing costs, the new roof on a rental — every one of those is money the investment cost you, and every one of them lowers your real return.

Switch on Fees & costs in the customize panel to add them. They join the amount invested to form your total cost basis, which is what the ROI is then measured against. A $10,000 investment returning $12,500 is a 25% ROI; add $500 of fees and it drops to 19%. That gap is the difference between a return you actually earned and one that only ever existed on paper.

Reading the chart

The ring splits the money by where it came from. On a gain, it divides what you got back into your own capital and the profit on top of it, so you can see at a glance how much of the outcome was your money simply coming home. On a loss, it splits what you put in into the part that came back and the part that did not. Hover any segment for its amount and its share.

What counts as a good ROI

There is no universal number, only a benchmark and a risk. The usual reference point is a broad stock index, which has returned roughly 10% a year before inflation over the long run — so an annualized ROI below that, on an investment carrying more risk than an index fund, is hard to justify. Against a savings account paying 4%, the same 10% looks excellent.

Compare annualized figures, not totals, and compare against something you could actually have bought instead. An ROI quoted with no time period attached is not yet an answer.

FAQ

What is the ROI formula?

ROI = (amount returned − amount invested) ÷ amount invested × 100. A $10,000 investment returning $12,500 gives (12,500 − 10,000) ÷ 10,000 × 100 = 25%.

If you switch on fees and costs, they are added to the amount invested first, so the return is measured against everything the investment actually cost you.

How do I calculate annualized ROI?

Annualized ROI = ((amount returned ÷ amount invested) ^ (1 ÷ years) − 1) × 100. The same 25% total return over two years works out to 11.8% a year, because each year compounds on the last.

This calculator takes the number of years from your start and end dates, so you never have to convert a holding period into a decimal yourself.

Can ROI be negative?

Yes. If you get back less than the investment cost you, the ROI is negative and the net gain is a loss. A $10,000 investment returning $8,000 is a −20% ROI.

The chart changes shape to match: instead of showing profit stacked on your capital, it splits your capital into the part that came back and the part that did not.

Should fees be included in ROI?

If you want a number that reflects what you actually earned, yes. Commissions, platform charges, and maintenance are all money the investment cost you, and leaving them out flatters the result.

Turn on Fees & costs in the customize panel and they are added to your cost basis. It is common for a few hundred dollars of fees to move a return by several percentage points.

What is a good ROI?

It depends entirely on the risk and the alternative. A broad stock index has returned around 10% a year before inflation over the long run, which is the usual benchmark for an investment of similar risk. Anything below that, carrying more risk, is hard to justify.

Always compare annualized figures. A 40% total return is excellent over one year and mediocre over ten.

What is the difference between ROI and ROAS?

ROAS — return on ad spend — divides revenue by advertising spend, so a campaign returning $4 for every $1 spent is a ROAS of 4. It counts revenue, not profit, and it ignores every cost except the ads.

ROI divides profit by total cost, so it is always the smaller and more honest number. A campaign with a ROAS of 4 can still have a negative ROI once the product itself is paid for.

Why is my annualized ROI blank?

Annualizing needs a positive amount returned and a holding period of at least a month. A total loss cannot be expressed as a yearly rate, and compounding a single week's gain out to a full year produces a figure in the hundreds or thousands of percent — technically correct, and useless.

The plain ROI and net gain are still shown in both cases.

Does this ROI calculator work for real estate or a business?

Yes — the ratio is the same whatever the asset. Put the purchase price in as the amount invested, everything you have spent since under fees and costs, and the sale price or current value as the amount returned.

For an investment you are still holding and are projecting forward rather than measuring backward, the compound interest calculator is the better tool.

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