Calculate your Return on Investment (ROI) and annualized return (CAGR) with interactive visual models.
Math Audited
Initial Investment Cost$10,000.00
$
$100$1M
Final Value of Investment$15,000.00
$
$0$2M
Additional Expenses / Fees$0.00
$
$0$100K
Holding Period (years)2 years
0.1 yrs50 yrs
Simple ROI
+50.00%
Annualized ROI (CAGR)
+22.47%
Investment Split
Profit+50%
Holding Period Timeline
Total Cost Basis$10,000.00
Net Profit / Loss$5,000.00
S&P 500 Historical Benchmark~10.00% annualized
How is this calculated?
1. Total Investment Cost (Cost Basis):
Total Cost = Initial Investment + Expenses Total Cost = $10,000.00 + $0.00 = $10,000.00
2. Net Profit:
Net Profit = Final Value - Total Cost Basis Net Profit = $15,000.00 - $10,000.00 = $5,000.00
3. Simple ROI:
ROI = (Net Profit / Total Cost Basis) × 100 ROI = ($5,000.00 / $10,000.00) × 100 = 50.00%
4. Annualized ROI (CAGR):
Years = 2 years = 2.0000 years Annualized ROI = [(Final Value / Total Cost)(1 / Years) - 1] × 100 Annualized ROI = [($15,000.00 / $10,000.00)(1 / 2.0000) - 1] × 100 = 22.47%
Mathematical Audit LogVerified against standard geometric compounding and cost basis formulas used by Investopedia and the Corporate Finance Institute.Last Verified: 2026-07-12
Mathematical Formulas
Simple ROI:
ROI = (Net Profit / Total Cost) × 100
Annualized ROI (CAGR):
Annualized ROI = [(Final Value / Total Cost)(1 / Years) - 1] × 100
Core Assumptions
Assumes a lump-sum initial investment with no subsequent cash additions or partial liquidations.
Assumes continuous annual compounding of returns.
Limitations & Exclusions
Does not adjust for inflation; high nominal return might lead to real purchasing power loss.
Does not consider relative investment risk profiles.
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About the ROI Calculator
Return on investment is the most widely used measure of profitability in business and personal finance because it reduces any investment to a single comparable percentage. It answers one question: for every unit of currency committed, how much came back as profit? Its universality is also its greatest weakness. Plain ROI ignores time entirely, so a 50 percent return earned over three months and one earned over ten years produce an identical figure despite being wildly different propositions. It also ignores risk, treats all cash flows as if they occurred at a single moment, and is easily manipulated by which costs the analyst chooses to include. Used carefully, with an annualised counterpart alongside it, ROI remains an excellent first filter for comparing marketing campaigns, equipment purchases, property deals and portfolio holdings. Used carelessly, it makes slow investments look identical to fast ones.
Mathematical Formula & Logic
Return on investment and its time-adjusted counterpart:
1. Basic ROI:
ROI = (Net Profit ÷ Cost of Investment) × 100
Where Net Profit = Final Value − Initial Cost
Equivalently:
ROI = ((Final Value − Initial Cost) ÷ Initial Cost) × 100
2. Annualised ROI (compound annual growth rate):
Annualised ROI = ((Final Value ÷ Initial Cost)^(1/n) − 1) × 100
Where n is the holding period in years. This is the constant yearly
rate that would compound the initial cost into the final value, and it
is the only fair way to compare investments of different durations.
3. Total cost should include all associated outflows:
Initial Cost = purchase price + fees + commissions + maintenance
4. Relationship between the two:
Final Value = Initial Cost × (1 + annualised rate)^n
Step-by-Step Example
Compare two investments to see why annualising matters:
Investment A — a share purchase
1. Initial cost including brokerage: 10,000
2. Sale proceeds after 3 years: 15,000
3. Net profit = 15,000 − 10,000 = 5,000
4. ROI = (5,000 ÷ 10,000) × 100 = 50%
5. Annualised = ((15,000 ÷ 10,000)^(1/3) − 1) × 100 = 14.47% per year
Investment B — a short-term contract
6. Initial cost: 10,000
7. Proceeds after 1 year: 13,500
8. Net profit = 3,500, so ROI = 35%
9. Annualised = ((13,500 ÷ 10,000)^(1/1) − 1) × 100 = 35.00% per year
On raw ROI, Investment A looks far better at 50 percent versus 35 percent. On an annualised basis Investment B is decisively superior, returning 35 percent a year against 14.47 percent. Because A tied up the capital for three years, it earned less per year despite the larger headline number. Always compare annualised figures when holding periods differ.
Reference Data & Values
scenario
roi
years
annualised roi
Doubled in 1 year
100%
1
100.00%
Doubled in 3 years
100%
3
25.99%
Doubled in 5 years
100%
5
14.87%
Doubled in 10 years
100%
10
7.18%
Up 50% in 3 years
50%
3
14.47%
Up 35% in 1 year
35%
1
35.00%
Down 20% in 2 years
−20%
2
−10.56%
Frequently Asked Questions
There is no universal threshold, because a good return is only meaningful relative to risk, time and the alternatives available. A common benchmark is the long-run return of a broad equity index, which has historically averaged roughly seven to ten percent a year before inflation, so an investment must beat that on an annualised, risk-adjusted basis to be worth the extra effort. A property deal returning 12 percent annually may be excellent or poor depending on leverage and vacancy risk. Always compare against what the same capital could have earned elsewhere, not against zero.
Plain ROI measures total percentage gain over the entire holding period with no reference to how long that took, while annualised ROI converts the same result into an equivalent constant yearly compound rate. A 100 percent total return is identical whether it took one year or ten, but annualised it is 100 percent in the first case and only 7.18 percent in the second. Whenever you compare investments held for different lengths of time, the annualised figure is the only honest comparison.
ROI assumes a single outflow at the start and a single inflow at the end, which makes it simple but blind to the timing of intermediate cash flows. Internal rate of return handles irregular cash flows across many periods by finding the discount rate at which their present values net to zero, and net present value discounts every future cash flow to today at a chosen required rate. For a rental property with monthly income and periodic repairs, IRR and NPV describe reality far better than ROI, which would compress all that activity into two numbers.
Yes, if you want the figure to mean anything. Excluding brokerage, transaction fees, ongoing maintenance and taxes inflates the return and is the most common way ROI gets quietly overstated. A share bought at 10,000 with 200 in fees and sold at 15,000 with 200 in fees and 750 in capital gains tax has a true net profit of 3,850 rather than 5,000, giving 37.7 percent instead of 50 percent. Decide which costs to include, apply the same rule to every option you compare, and state the rule.
Yes. A negative ROI simply means the final value fell below the total invested cost, so capital was lost rather than gained. An ROI of −20 percent means one fifth of the money is gone. Note the asymmetry that catches people out: a 50 percent loss requires a subsequent 100 percent gain merely to break even, because the gain is calculated on the reduced base. This asymmetry is why capital preservation matters more to long-run compounding than chasing large gains.
Marketing ROI, often written as ROMI, uses incremental revenue attributable to the campaign rather than total revenue, and typically subtracts the cost of goods sold to work in gross profit rather than turnover. The formula becomes (incremental gross profit − campaign cost) ÷ campaign cost. The hard part is attribution: isolating the sales the campaign actually caused from those that would have happened anyway usually requires a holdout group or a controlled test, and campaigns evaluated without one tend to report returns that quietly include baseline demand.