Return on Investment (ROI) Calculator
Measure the probability of gaining a return from an investment. Evaluate the performance or compare the efficiency of different investments.
Annualized ROI is useful for comparing the performance of investments held for different lengths of time.
🏆 Return on Investment (ROI)
Everything you need to know about using this calculator and the math behind it.
How it Works
Measures the profitability of an investment relative to its cost. It is a universal metric used in finance and business to evaluate efficiency.
The Formula
ROI = ((Net Profit) / Cost of Investment) × 100.
Pro Tip
While ROI is useful, it doesn't account for time. An ROI of 50% over 10 years is worse than an ROI of 10% over 1 year. Look at Annualized ROI.
Frequently Asked Questions
What is ROI and why does it matter? +
Return on Investment (ROI) measures the profit or loss generated relative to the money invested, expressed as a percentage. It matters because it's a universal benchmark for efficiency — letting you compare a stock investment, a business decision, a marketing campaign, or a real estate purchase on the same scale regardless of size.
What's the difference between ROI and annualized ROI? +
ROI is a total return over the entire period, while annualized ROI converts that total return into a per-year rate. This makes comparison fair: a 50% ROI over 5 years is about 8.4% annualized, while a 50% ROI over 2 years is 22.5% annualized — very different outcomes. Always compare annualized figures when evaluating investments held for different durations.
What is considered a good ROI? +
"Good" ROI depends on the asset class and risk involved. For stocks, matching or beating the S&P 500's ~10% annual return is considered good. For real estate, 8–12% is common in strong markets. For business investments, 15–25%+ is typical. Always compare your ROI to the risk-free rate (US treasuries) — if you're not beating that, your investment risk isn't justified.
What are ROI's limitations? +
ROI doesn't account for time (annualized ROI solves this), risk, or inflation. Two investments with identical ROIs may have vastly different risk profiles. It also ignores cash flow timing — receiving $1,000 today is worth more than $1,000 in 5 years (time value of money). For complex projects, NPV (Net Present Value) and IRR (Internal Rate of Return) provide more complete pictures.
How is ROI used in marketing and business? +
In marketing, ROI helps justify ad spend and compare channel effectiveness. If you spend $1,000 on Google Ads and generate $4,000 in revenue, your marketing ROI is 300%. Businesses use ROI to evaluate capital projects, hiring decisions, software purchases, and expansions. Any activity where you can measure cost in and value out can have an ROI calculated.