How to use ROI Calculator
This ROI calculator measures the return on an investment as a percentage of its cost, so you can compare opportunities on a like-for-like basis. Enter what you paid, any extra costs and what the investment is now worth to see your net profit, your simple ROI and your annualized ROI. The annualized figure is especially useful because it converts returns from investments held for different lengths of time into a single comparable yearly rate.
- Enter the initial cost of the investment.
- Enter the final value or sale price.
- Add any extra costs such as fees, commissions or maintenance.
- Enter how many years you held the investment.
- Review ROI, net profit and annualized ROI.
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How ROI and annualized ROI are calculated
Simple ROI is net profit divided by total cost, expressed as a percentage: ROI = (final value − total cost) ÷ total cost × 100. Total cost includes the purchase price plus any extra costs. Annualized ROI smooths that total return across the holding period using the formula (1 + ROI)^(1/years) − 1, which reveals the equivalent compound yearly rate. A 50% return over two years is only about 22.5% per year once compounding is accounted for.
| Total ROI | Years held | Annualized ROI |
|---|---|---|
| 50% | 1 | 50.0% |
| 50% | 2 | ~22.5% |
| 100% | 5 | ~14.9% |
Why ROI alone can mislead
ROI ignores time, risk and cash flow, so a high headline figure earned over many years may be worse than a smaller one earned quickly. It also does not account for inflation or the opportunity cost of tying up capital. Use annualized ROI to compare investments held for different periods, and always include every cost — fees, taxes and upkeep — so the return reflects what you actually pocketed rather than a flattering gross number.
Worked examples
Stock flip
Inputs: $1,000 → $1,500 · 2 yrs
Result: 50% ROI · ~22.5%/yr · $500 profit
With fees
Inputs: add $100 costs
Result: ~36.4% ROI · $400 profit
Glossary
- ROI
- Return on investment — net profit as a percentage of the amount invested.
- Annualized ROI
- The equivalent compound yearly return for an investment held over multiple years.
- Net profit
- Final value minus total cost, including fees and expenses.
- Cost basis
- The total amount invested, used as the denominator in ROI.
- Opportunity cost
- The return you give up by choosing one investment over another.
Related reading
Frequently Asked Questions
Why use ROI Calculator?
- Annualizes the total return so investments held for different periods are fairly compared
- All-in cost field accepts fees, commissions and maintenance to avoid inflating the return
- Shows how the same total return looks very different per year over 1, 3 or 10 years
- Works for stocks, property, a business acquisition, marketing spend or any capital outlay
Common use cases
- Compare a property flip held 18 months against a stock position held 3 years on equal footing
- Calculate the annualized ROI on a rental property after including purchase and renovation costs
- Assess whether a marketing campaign costing $8,000 that generated $22,000 in revenue was profitable
- Evaluate two competing capital investments with different outlays and different holding periods
- Determine the return on a professional certification relative to the salary increase it enabled
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