ROI Calculator
Return on investment, profit & annualized return
$10,000 that grows to $15,000 in three years is a 50% total ROI but only a 14.47% annualized return, and the gap between those two is where most comparisons go wrong. Enter what you put in, what it is worth now and how long you held it to see total ROI, net profit and annualized return.
How to calculate ROI
Used as a return on investment calculator or a rate of return calculator, the arithmetic is the same. If you searched how to calculate return on investment, this is the whole answer in one line.
Return on investment is (gain − cost) ÷ cost, expressed as a percentage. A $10,000 investment now worth $15,000 has a $5,000 gain, so:
$5,000 ÷ $10,000 = 0.50 = 50% ROI.
That is the whole formula. The complication is never the arithmetic — it is what you count as "cost", and over what period.
The mistake this page exists to prevent: 50% over one year and 50% over ten years are the same ROI and wildly different investments. Total ROI ignores time. Annualized return does not.
How to calculate annualized return on investment
Annualized return restates the gain as an average per year rate, so investments held for different lengths of time can be compared. The formula is the compound annual growth rate:
((final ÷ initial) ^ (1 ÷ years) − 1) × 100
For $10,000 growing to $15,000: (1.5 ^ 0.3333 − 1) × 100 = 14.47% a year over three years. Here is the same 50% total ROI across different holding periods:
| Holding period | Total ROI | Annualized return | Read as |
|---|---|---|---|
| 1 year | 50% | 50.00% | Exceptional |
| 2 years | 50% | 22.47% | Very strong |
| 3 years | 50% | 14.47% | Strong |
| 5 years | 50% | 8.45% | About market average |
| 10 years | 50% | 4.14% | Below market |
| 20 years | 50% | 2.05% | Behind typical inflation |
A 20-year "50% return" sounds respectable and is roughly what a savings account would have done. Whenever someone quotes a total return without the period, that is the number to ask for.
ROI worked examples
| Scenario | In → out | Profit | Total ROI | Annualized |
|---|---|---|---|---|
| Shares held 3 years | $10,000 → $15,000 | $5,000 | 50% | 14.5% |
| Ad campaign, 1 year | $2,000 → $2,600 | $600 | 30% | 30.0% |
| Property held 10 years | $250,000 → $400,000 | $150,000 | 60% | 4.8% |
| A loss over 2 years | $5,000 → $4,000 | −$1,000 | −20% | −10.6% |
The property is the instructive one. A $150,000 profit feels substantial, and 4.8% a year is below what a plain index fund averaged over the same kind of period — before counting the maintenance, taxes and transaction costs a property actually incurs.
Comparing two investments makes the point sharper. One that doubles your money in 7 years is a 100% ROI but only 10.4% a year; one that grows 60% in 3 years returns 17.0% a year. The bigger headline is the worse investment, and only the annualized figure shows it.
How compounding makes total ROI misleading
Run the comparison the other way. A steady 10% a year produces total ROI figures that look increasingly spectacular:
| Years at 10%/yr | $10,000 becomes | Total ROI |
|---|---|---|
| 1 | $11,000 | 10% |
| 3 | $13,310 | 33% |
| 5 | $16,105 | 61% |
| 10 | $25,937 | 159% |
| 20 | $67,275 | 573% |
A "573% return" is an ordinary 10% a year held for two decades. This is why marketing material quotes total return and prospectuses quote annualized.
What counts as a good ROI
Only against an alternative and a level of risk. These are historical averages for orientation, not forecasts:
| Asset | Typical long-run annualized | Note |
|---|---|---|
| US large-cap equities | ~10% | Roughly 7% after typical inflation |
| Government bonds | ~2 to 5% | Lower risk, lower return |
| Savings accounts | ~0.5 to 5% | Tracks central bank rates |
| Residential property | ~3 to 5% capital | Before costs; leverage changes it |
| Inflation (the bar to clear) | ~2 to 3% | Below this you lose money in real terms |
The number worth remembering is the last one. A return below inflation is a real-terms loss however positive the ROI looks.
ROI, rate of return and IRR
| Measure | Answers | Use when |
|---|---|---|
| Total ROI | How much did it gain overall? | Single in, single out, period known |
| Annualized (CAGR) | What yearly rate is that? | Comparing different holding periods |
| IRR | What rate fits irregular cash flows? | Money added or taken out over time |
| ROAS | Revenue per ad dollar | Marketing spend, not investments |
This calculator handles the first two. If you added or withdrew money part-way through, neither is accurate and you need IRR.
Two neighbouring questions need a different tool. To project money that keeps growing with regular contributions, rather than measure a return after the fact, use the compound interest calculator. For a rental, where the mortgage and the rent change the arithmetic, the rental property calculator gives cap rate and cash-on-cash return.
Where ROI misleads
- No time period stated. Always ask "over how long?"
- Costs left out. Fees, taxes, maintenance and your own time are part of "cost".
- Ignoring inflation. 3% a year while inflation runs 4% is a loss.
- Comparing across risk levels. 15% from a start-up and 15% from a bond are not the same thing.
- Using ROI with irregular cash flows. That is what IRR is for.
- Survivorship bias. The investments people quote ROI on are the ones that worked.
- No opportunity cost. A return only means something next to what the same money would have earned elsewhere at similar risk.
What the ROI figures assume
Two formulas, applied exactly as stated:
- Total ROI = (final value − initial investment) ÷ initial investment × 100
- Annualized return = ((final ÷ initial) ^ (1 ÷ years) − 1) × 100 — the compound annual growth rate, or CAGR
Benchmark ranges on this page are historical averages, quoted so you can sanity-check a figure. They are not forecasts and nothing here is investment advice. Past returns do not predict future ones, and this calculator ignores tax, fees, inflation and any money added or withdrawn part-way through.
Sources, checked
- Historical Returns on Stocks, Bonds and Bills: 1928-2024, Aswath Damodaran, NYU Stern School of Business. The long-run stock and bond returns quoted as benchmarks.
Figures reviewed . Every worked example on this page is checked against the calculator above.
ROI Calculator: frequently asked questions
How do you calculate ROI?
Subtract the cost from the final value, divide by the cost, and multiply by 100. A $10,000 investment worth $15,000 gained $5,000, so $5,000 ÷ $10,000 = 50% ROI. Include every cost, not just the purchase price.
What is the annual ROI formula?
Annualized return is ((final ÷ initial) ^ (1 ÷ years) − 1) × 100, also called CAGR. For $10,000 growing to $15,000 over three years that is 14.47% a year, even though the total ROI is 50%.
What is the difference between ROI and annualized return?
Total ROI ignores time entirely; annualized return divides it across the holding period. A 50% return is 50% a year over one year but only 4.14% a year over ten. Whenever a return is quoted without a period, ask for it.
How do you calculate rate of return over multiple years?
Use the annualized formula rather than dividing total ROI by the number of years, which overstates it. Dividing 50% over three years gives 16.7%; the correct compound figure is 14.47%, because each year's growth builds on the last.
What is a good ROI?
It only means anything against an alternative and a risk level. US large-cap equities have historically averaged around 10% a year nominal, government bonds 2 to 5%, and inflation 2 to 3%. Anything below inflation is a real-terms loss. These are historical averages, not forecasts.
Can ROI be negative?
Yes. A $5,000 investment worth $4,000 has a −20% ROI, or −10.6% annualized over two years. Negative ROI is a normal output and the calculator reports it rather than flooring at zero.
Does this ROI calculator account for tax and fees?
No. It compares a single amount in against a single amount out. Deduct fees, taxes and costs from the final value, or add them to the initial investment, before entering the figures. If money went in or out part-way through, you need IRR instead.