ROI Calculator
Turn an investment’s cost and current value into a return on investment — plus the annualized rate to compare deals fairly.
Net gain: $500.00 on a $1,000.00 investment. Annualized over 3 years: 14.47% per year.
Return on investment is your net gain divided by what you put in: ROI = (final value − cost) ÷ cost × 100. Turning $1,000 into $1,500 is a 50% ROI — a $500 gain on $1,000. Spread that over 3 years and it works out to about 14.5% per year annualized.
What ROI measures
ROI tells you how much an investment earned relative to its cost, as a single percentage. It’s deliberately simple — one number that puts a $500 profit on a $1,000 stake (50%) on the same footing as a $5,000 profit on a $10,000 stake (also 50%). That makes returns of very different sizes directly comparable. The catch is that plain ROI says nothing about how long the money was tied up, which is where the annualized return comes in.
The numerator is your net gain; dividing by cost and multiplying by 100 turns it into a percent. Annualized = ((final ÷ cost)^(1 ÷ years) − 1) × 100.
Worked example
You buy a position for $1,000 and sell it three years later for $1,500.
- 1 Find your net gain. Final value − cost = $1,500 − $1,000 = $500.
- 2 Divide the gain by what you invested. $500 ÷ $1,000 = 0.5.
- 3 Multiply by 100 for the percent. 0.5 × 100 = 50% ROI.
- 4 Annualize it over the holding period. ((1,500 ÷ 1,000)^(1 ÷ 3) − 1) × 100 = (1.5^0.3333 − 1) × 100 ≈ 14.47% per year.
- 5 Compare the two numbers. The 50% is the total return; the 14.47% is what each year contributed, so you can stack it against other yearly rates.
Total ROI vs. annualized return
Same 50% total ROI ($1,000 → $1,500) held for different lengths of time. The longer you hold, the lower the yearly rate that produced it.
| Cost → final | Years held | Total ROI | Annualized return |
|---|---|---|---|
| $1,000 → $1,500 | 1 | 50% | 50.00%/yr |
| $1,000 → $1,500 | 3 | 50% | 14.47%/yr |
| $1,000 → $1,500 | 5 | 50% | 8.45%/yr |
| $500 → $2,000 | 1 | 300% | 300.00%/yr |
| $1,000 → $700 | 2 | −30% | −16.33%/yr |
Reading the result
ROI ignores time — use the annualized rate to compare. A 50% return is great in one year and merely fine over five. Total ROI can’t tell the difference, so when you’re weighing one investment against another, compare their annualized returns instead. That’s the rate that, compounded each year for the holding period, reproduces the total ROI.
ROI doesn’t include risk or fees on its own. The basic formula counts only the cost and final value you enter. A high ROI on a volatile bet isn’t the same as the same ROI on a safe one, and trading commissions, taxes, or management fees can quietly eat into the real return. To capture those, fold them into the cost or subtract them from the final value before you calculate.