How is ROI calculated?

The profit is determined by subtracting the amount invested from the proceeds. This profit is then divided by the amount invested and multiplied by 100. If an amount of $1,000 was invested and has grown to $1,200, the ROI would be 200, divided by 1,000, which equals 20%.

There is no fixed target since it depends on the risk involved and investment time horizon. As a rough guide, long-term average annual return of broad equity indices are around 10%, and any return that exceeds this figure is considered to be a very good result. Try to at least beat inflation rate.

What does a negative ROI mean?

A negative ROI means that the value of an investment falls below its purchase price and thus a loss is incurred instead of a profit. For example, if your ROI is -25%, this means you end up getting back 1/4 less money than what was invested.

Why is the ROI converted to an annual rate?

The normal ROI does not take into account time so it may appear that a 40% return over ten years is better than a 20% return within one year even though the latter option offers a much higher annual rate of return. By converting the ROI to an annualized rate, the returns are spread out across the entire investment period which allows for a fair comparison between investments with different durations.

What is the difference between ROI and rate of return?

The two terms are closely related. The ROI is the overall percentage return over the entire investment period, while the yield usually indicates the return within a specific time frame, such as one year. An annualized ROI allows you to convert the total ROI into a comparable annual return.

ROI Calculator

Your investment

Amount invested

Amount returned

ROI

Annualize over a holding period

Turn total ROI into a per-year rate so you can compare investments of different lengths.

Compare a second investment

Enter a second investment to see which one earned the higher return.

Enter any two of amount invested, amount returned, and ROI. The calculator solves for the third.

Please input values into the fields

Charts

Show the cost-vs-profit chart

Split the money you got back into your original cost and your profit.

Show the growth chart

Plot the investment growing from your cost to its final value year by year.

Return on investment (ROI) is a measure of how much profit has been made relative to the amount invested. It's a commonly used metric for evaluating stocks, real estate, marketing campaigns and business projects. Because it converts profits into a percentage, transactions of different magnitudes can be easily compared against each other.

This calculator will show the return on investment (ROI), net profit and capital growth when you enter the amount invested and the proceeds. If one of the three main fields is left blank, this tool will automatically calculate that value for you. By enabling additional options, you can convert the ROI to an annualized value or compare two investments against each other depending on how long they were held.

What is return on investment?

ROI (Return on Investment) is a measure of profit or loss relative to the amount invested. A positive ROI indicates a gain while a negative ROI indicates a loss. Because ROI is a relative figure, a 20% return means the same thing whether you invested $100 or $100,000. This makes it an easy number to compare.

Formula for calculating ROI.

ROI is the result when profit is divided by cost and the result is expressed as a percentage.

\text{ROI} = \frac{\text{Amount returned} - \text{Amount invested}}{\text{Amount invested}} \times 100\%

The profit, often referred to as the net profit, is the amount that results from the sale price minus the investment.

\text{Net profit} = \text{Amount returned} - \text{Amount invested}

Say you buy a stock for $1,000 and later sell it for $1,200. The net profit is $200 so the return on investment (ROI) would be calculated as 200 divided by 1,000 which equals 0.20 or 20%. You can also use this same formula in reverse: if you input one of those two amounts (either your desired ROI or either of the other values) into a calculator it will calculate the other amount for you.

ROI per year: taking account of time factor

The normal ROI does not take into account the length of time an investment has been held, which can give a misleading picture. A 50% return sounds good but if it took twenty years to achieve that return, then it may not be as attractive. The annualized ROI calculates the average annual return by spreading the total return over each year, allowing for better comparison with other investments:

\text{Annualized ROI} = \left(1 + \text{ROI}\right)^{\frac{1}{n}} - 1

In this case n is the number of years that you held your investment. If you have a total return of 100% over four and a half years then that equates to an annualized rate of return of about 16.7%. Open up the "ROI per year" option and enter the holding period in years, months or days to perform the calculation.

Some related metrics answer slightly different questions and you can only compare metrics meaningfully if you understand what each one means.

Metric	What it adds over plain ROI
Annualized ROI	Spreads the return across time for a per-year rate
Rate of return (ROR)	Usually stated for a set period, such as a year
Return on equity (ROE)	Uses only your own capital, not borrowed money
Internal rate of return (IRR)	Handles many cash flows at different times

What kind of return is good?

There is no single correct answer. Whether a return is good depends on the risk taken and how long the capital is tied up for. A commonly used benchmark is the stock market. Over the long term, broad indices like the S&P 500 have returned about 10% per year before inflation, or about 7% after inflation. If you consistently beat those numbers, then that's a very good return. You should at least try to beat inflation, as this will maintain the purchasing power of your capital.

When is ROI useful and where are its limitations?

ROI is very useful when you need to quickly and objectively assess whether something has been profitable. Investors use it to evaluate stocks and funds, landlords use it to assess rental properties, and marketers use it to determine if the revenue from a marketing campaign will cover its budget. The simplicity is also a weakness. ROI alone cannot explain how long capital was tied up, the extent of risk taken or when cash flows occurred in the overall process. So it makes sense to combine ROI with an annualized rate of return when time matters and with metrics like IRR when cash flows are complex.

The table below shows the individual input parameters and examples of their values.

Symbol	Meaning	Example
Amount invested	What the investment cost you	1,000
Amount returned	What it is worth or sold for	1,200
Net profit	Returned minus invested	200
ROI	Profit as a percent of cost	20 percent
Holding period	How long you held it	2 years

This calculator is for educational and planning purposes only and does not constitute financial advice. Past performance is no guarantee of future results, and actual returns may vary depending on market conditions, fees, and taxes. Please consult a qualified professional before making any investment decisions.

Frequently asked questions

How is ROI calculated?: The profit is determined by subtracting the amount invested from the proceeds. This profit is then divided by the amount invested and multiplied by 100. If an amount of $1,000 was invested and has grown to $1,200, the ROI would be 200, divided by 1,000, which equals 20%.
What is a good ROI?: There is no fixed target since it depends on the risk involved and investment time horizon. As a rough guide, long-term average annual return of broad equity indices are around 10%, and any return that exceeds this figure is considered to be a very good result. Try to at least beat inflation rate.
What does a negative ROI mean?: A negative ROI means that the value of an investment falls below its purchase price and thus a loss is incurred instead of a profit. For example, if your ROI is -25%, this means you end up getting back 1/4 less money than what was invested.
Why is the ROI converted to an annual rate?: The normal ROI does not take into account time so it may appear that a 40% return over ten years is better than a 20% return within one year even though the latter option offers a much higher annual rate of return. By converting the ROI to an annualized rate, the returns are spread out across the entire investment period which allows for a fair comparison between investments with different durations.
What is the difference between ROI and rate of return?: The two terms are closely related. The ROI is the overall percentage return over the entire investment period, while the yield usually indicates the return within a specific time frame, such as one year. An annualized ROI allows you to convert the total ROI into a comparable annual return.

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Disclaimer: This calculator is provided for general informational and educational purposes only. Our calculators are under active development, and results may be inaccurate, incomplete, or unsuitable for your situation. Always verify the figures independently and seek advice from a qualified professional before relying on them. We make no warranties and accept no liability for any loss or decision arising from use of this tool.

References

U.S. Securities and Exchange Commission: Investor.gov
Investing basics and how returns are measured.
Investopedia: Return on Investment (ROI)
Definition, formula, and worked examples for ROI.