ROI Calculator
Calculate return on investment, net profit, and annualized return rate for any investment.
ROI Calculator
ROI Calculator works out return on investment, total profit, and the annualized return, which is the number that actually lets you compare investments of different lengths.
How to use it
- Enter your initial investment and the final value.
- Enter the duration in years.
- Add any additional costs, which are subtracted from the return.
- Read the total ROI and the annualized figure.
Why annualized return is the number that matters
Total ROI is simply the gain divided by what you put in. It is easy to calculate and useless for comparison, because it says nothing about how long the money was tied up.
Annualized return solves that by expressing the result as a constant yearly rate. A 45% total return sounds impressive until you learn it took three years, at which point it is about 13% a year. Comparing a two-year investment to a ten-year one on total ROI alone will lead you to the wrong conclusion every time.
Worked example
The default figures:
- Initial investment$10,000
- Final value$14,500
- Duration3 years
Result: $4,500 profit, 45% total ROI, and about 13.2% annualized.
When it helps
- Comparing investments that ran for different lengths of time.
- Evaluating a business project or a marketing spend.
- Checking whether a return beat what an index fund would have done.
- Including transaction costs and fees, which is where real returns quietly erode.
Common mistakes
- Comparing total ROI across different time periods. It is the most common way to talk yourself into a worse investment.
- Leaving out costs. Fees, commissions and taxes are the difference between the headline return and what you keep.
- Ignoring risk. A 13% return from an index fund and a 13% return from a single speculative bet are not the same result.
What this tool handles
- A calculation tool, not investment advice.
