How it works
Return on investment expresses your profit as a percentage of what you put in:
ROI = (Final Value + Net Income − Initial Investment) / Initial Investment × 100%
- Final Value = what the investment is worth when sold or measured
- Net Income = cash the investment paid you along the way (dividends, rent, coupons)
- Annualized ROI =
(1 + ROI)^(1/years) − 1, the equivalent yearly rate
Annualizing makes different investments comparable: doubling your money in 2 years is far better than doubling it in 20, even though both show ROI = 100%.
Example
You invest $10,000 and the position is worth $12,500 after 3 years, with no interim income:
- Total return = $2,500
- ROI = 2,500 / 10,000 = 25%
- Annualized ROI = (1.25)^(1/3) − 1 ≈ 7.72% per year
What this calculator does not include
ROI here is a simple percentage measure. It does not account for the timing of cash flows (for that, finance professionals use IRR), taxes, fees, inflation, or risk. Use it for quick comparisons, not as a full portfolio analysis.
FAQ
What is a good ROI?
It depends on the asset class and time frame. As a rough benchmark, the S&P 500 has averaged around 10% per year before inflation over the long run. Any investment should also be compared against its own risk level and against risk-free alternatives.
What is the difference between ROI and annualized ROI?
ROI is the total percentage return over the whole holding period. Annualized ROI converts it into an equivalent yearly rate, so a 25% gain over 3 years equals about 7.72% per year. Annualized ROI makes investments with different time frames comparable.
Does ROI include dividends or rental income?
It can. Enter any income received during the holding period (dividends, rent, coupons) in the net income field, and it will be added to your total return before calculating ROI.