CalcNest

ROI Calculator

See the gain or loss on an investment as a dollar amount and a percentage — and, with the holding period, the equivalent yearly return.

By Rachel Okafor, CPA · Last reviewed

$
Include purchase fees and any added costs.
$
Sale proceeds or current value, plus income received.
years

Result

—

return on investment

  • Gain or loss
  • Annualized return
  • Investment multiple

What ROI measures

Return on investment compares what you got back with what you put in. It is the simplest way to compare two opportunities of the same length, but it hides time: a 50% gain over two years and over twenty years have the same ROI. The annualized return fixes that by asking what steady yearly rate would have produced the same result, which is also called the compound annual growth rate (CAGR).

The formulas

Gain = returned − invested ROI = gain / invested × 100% Annualized ROI = (returned / invested)^(1 / years) − 1

Worked example

You invest $10,000 and four years later the position, including dividends, is worth $16,500. Gain = $6,500; ROI = 6,500 / 10,000 = 65%.

Annualized: 1.65^(1/4) − 1 = 1.1334 − 1 = 13.34% a year.

Limitations

  • ROI ignores risk and does not tell you how bumpy the ride was.
  • It assumes a single investment at the start. Use IRR for several cash flows.
  • Nominal returns are not adjusted for inflation; use the inflation calculator to compare in today's dollars.
  • Results are rounded to two decimals.

Sources: U.S. Securities and Exchange Commission, Investor.gov, Glossary, Annual return; Investor.gov Compound Interest Calculator.

Frequently asked questions

What is a good ROI?

It depends on the risk and the time involved. A 65% return sounds large, but over 4 years it is about 13.3% a year, and over 15 years it would be only 3.4% a year. Compare annualized ROI with alternatives of similar risk — for example, the yield on Treasury securities for a near risk-free baseline.

Why is annualized ROI lower than total ROI divided by years?

Because returns compound. 65% over 4 years is not 16.25% a year; it is the rate that grows $1 to $1.65 in four compounding steps: 1.65^(1/4) − 1 = 13.34%. Simple division overstates the yearly rate.

Should I include dividends, fees and taxes?

Yes, for a true picture. Add dividends or rental income received to "Amount returned", and add fees, commissions and improvement costs to "Amount invested". Taxes on the gain reduce what you actually keep.

What if I added money at different times?

Simple ROI and the annualized figure assume one up-front investment. With several deposits or withdrawals, a money-weighted return (IRR / XIRR in a spreadsheet) is more accurate.

CalcNest results are estimates based on the inputs and assumptions above, not financial, tax or lending advice. A lender's official Loan Estimate or your account statement is the final word.