How the ROI Calculator Works
ROI stands for return on investment. It tells you how much you gained or lost on an investment compared with the money you put in. This calculator gives you three numbers: your net profit, your total ROI, and your annualized ROI, which shows the return as a yearly rate so you can compare investments held for different lengths of time.
What you enter
- Amount invested: the money you originally put in.
- Amount returned: what the investment is worth now or what you sold it for, including any income it paid you along the way, such as dividends or rent. Enter 0 if you lost everything.
- Investment period: how long you held it, in years or in months.
The formulas
Net profit is what you got back minus what you put in:
net profit = amount returned - amount invested
Total ROI is that profit as a percentage of the money you invested:
total ROI = (net profit / amount invested) x 100
Annualized ROI is the steady yearly rate that would turn your investment into the amount returned over that time. It is also called the compound annual growth rate:
annualized ROI = ((amount returned / amount invested) ^ (1 / years) - 1) x 100
The calculator also shows the money multiple, which is the amount returned divided by the amount invested. A multiple of 1.45x means you ended up with 1.45 times your money.
A worked example
Suppose you invest $10,000 and three years later it is worth $14,500.
| Step | Working | Result |
|---|---|---|
| Net profit | 14,500 - 10,000 | $4,500 |
| Total ROI | 4,500 / 10,000 x 100 | 45% |
| Money multiple | 14,500 / 10,000 | 1.45x |
| Annualized ROI | (1.45 ^ (1/3) - 1) x 100 | 13.19% a year |
Growth chart
Here is how that $10,000 grows year by year at the annualized rate of 13.19%. The longer the bar, the more the investment is worth.
Start ████████████████████████████ $10,000 Year 1 ███████████████████████████████ $11,319 Year 2 ███████████████████████████████████ $12,811 Year 3 ████████████████████████████████████████ $14,500
Why the annualized figure matters
Total ROI ignores time, so it can be misleading. Compare two projects. Project A turned $10,000 into $14,500 over 3 years, a total ROI of 45%. Project B turned $10,000 into $13,000 in just 1 year, a total ROI of 30%. Project A has the bigger total, but Project B earned far more per year:
Project A (3 years) ██████████████████ 13.19% a year Project B (1 year) ████████████████████████████████████████ 30% a year
Looking at the annualized ROI shows that Project B is the stronger investment, even though its total ROI is lower.
Reading your result
- A positive ROI means you made money. A negative ROI means you lost money, and the calculator shows it in red.
- An ROI of 0% means you got exactly your money back.
- An ROI of -100% means you lost everything you invested.
- A very short period can make the annualized figure look huge. A 10% gain in 6 months is a 21% annualized rate, but it does not mean you would keep earning that every year.
What this calculator does not include
- Taxes, fees and commissions, unless you take them off the amount returned yourself.
- Inflation. A 5% return in a year when prices rose 4% is worth much less than it looks.
- Money added or taken out along the way. If you made several deposits or withdrawals, a measure such as IRR is more accurate.
- Risk. Two investments with the same ROI can be very different in how risky they were.
This tool gives an estimate for general information only. It is not investment advice, and past returns do not predict future results.