ROI Calculator (return on investment & annualized ROI)

Understanding the ROI calculator — concept and principle

Return on investment (ROI) shows how much an investment gained or lost relative to what it cost. This calculator gives the total ROI, the money multiple and, because a gain over several years is not the same as a gain in one, an annualized ROI.

1.35^(1/3) − 1 = 10.52% a year; dividing 35% by 3 overstates it at 11.67%.

How it is calculated

ROI = (amount returned − amount invested) ÷ amount invested.
Gain or loss = amount returned − amount invested.
Multiple = amount returned ÷ amount invested.
Annualized ROI (CAGR) = (returned ÷ invested)^(1 ÷ years) − 1.
Simple ROI per year = total ROI ÷ years, without compounding.

The principle

ROI is the simplest measure of profitability: what you got back compared with what you put in. Its weakness is that it ignores time. A 35% gain over three years is less impressive than 35% in one. The compound annual growth rate answers the question "what steady yearly return would turn the investment into the final amount?" Dividing the total ROI by the years overstates long investments because it ignores that each year's gain builds on the last.

Worked example

Default inputs: invested 10,000 USD, returned 13,500 USD, 3 years.

Gain = 13,500 − 10,000 = 3,500.00 USD.
ROI = 3,500 ÷ 10,000 = 35%; multiple = 1.35×.
Annualized ROI = 1.35^(1/3) − 1 ≈ 10.52%.
Simple ROI per year = 35% ÷ 3 ≈ 11.67%, higher because it ignores compounding.

Each point is the calculator re-run with only “Amount invested (total cost)” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Amount invested (total cost)	ROI
2,500	440%
5,000	170%
7,500	80%
10,000	35%
12,500	8%
15,000	-10%
20,000	-32.5%

How to read the result

Compare the annualized ROI with alternatives over the same period, such as a savings rate or an index fund. Include every cost (fees, taxes, maintenance) in the amount invested and every benefit (dividends, rent) in the amount returned for an honest figure. A higher ROI usually comes with higher risk.

Common mistakes

Comparing total ROIs of investments held for different lengths of time.
Leaving out fees and taxes.
Using simple ROI per year to compare with annual rates.
Ignoring cash flows during the period; use an IRR or Modified Dietz return if you added or withdrew money.

Keep in mind: ROI ignores risk and the timing of interim cash flows. This is an estimate for information, not investment advice.

Frequently asked questions

What is a good ROI?

It depends on the risk and the alternatives; compare the annualized figure with what you could earn elsewhere.

How is annualized ROI different from ROI?

Annualized ROI spreads the total over the years with compounding, so investments of different lengths can be compared.

Can ROI be negative?

Yes, when you get back less than you invested.

Sources: CFA Institute, Quantitative Methods: Rates and Returns (holding period and annualized returns) · Brealey, Myers & Allen, Principles of Corporate Finance

Checked 9 Nov 2026. Return on investment and compound annual growth rate, standard definitions (e.g. CFA Institute, Quantitative Investment Analysis — holding-period and annualized returns).

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