How to calculate ROI
Gain = Amount returned − Amount invested ROI = Gain ÷ Amount invested × 100 Example: invested $5,000, returned $5,900 Gain = 5,900 − 5,000 = $900 ROI = 900 ÷ 5,000 × 100 = +18% "Amount returned" means the total value you ended up with — the sale proceeds or current value, not just the profit. If you also received dividends, rent, or interest along the way, add them to the returned amount to measure total return rather than price change alone. ROI as calculated here ignores fees and taxes unless you subtract them from the returned amount yourself.
ROI vs. annualized ROI — why time matters
A plain ROI percentage says nothing about how long the money was invested. An 18% return is excellent over one year, decent over three, and poor over ten. Annualized ROI (also called CAGR — compound annual growth rate) converts a total return into the equivalent steady yearly rate:
Annualized = (Returned ÷ Invested)1 / Years − 1 Example: $10,000 → $14,641 over 4 years (14,641 ÷ 10,000)1/4 − 1 = 1.46410.25 − 1 = 10% per year Note that the answer is 10%, not 46.41% ÷ 4 ≈ 11.6% — dividing total ROI by the number of years overstates the rate because it ignores compounding. Also note the asymmetry between the two measures: plain ROI has no time dimension and no upper limit — a 500× return is simply +49,900% — while annualized ROI compresses any result into a per-year rate. When you enter dates, the calculator counts the exact days between them and converts to years using 365.25 days per year to account for leap years.
Total ROI vs. annualized — same investment, different lens
| Invested | Returned | Period | Total ROI | Annualized |
|---|---|---|---|---|
| $10,000 | $11,000 | 1 year | +10% | +10.00% |
| $10,000 | $11,000 | 3 years | +10% | +3.23% |
| $10,000 | $11,000 | 5 years | +10% | +1.92% |
| $10,000 | $20,000 | 10 years | +100% | +7.18% |
| $10,000 | $8,000 | 2 years | −20% | −10.56% |
The first three rows are the point: the same +10% total return is a very different result depending on how long it took. Doubling your money sounds dramatic, but over ten years it is a 7.18% annual rate — solid, not spectacular.
Solving for a missing value
The third tab rearranges the ROI formula to find whichever value you don't have. Target a return: "I invest $5,000 aiming for 18% — what must it be worth?" ($5,900). Work backwards from a goal: "I want $5,900 back at 18% ROI — how much do I need to invest?" ($5,000). Negative ROI works too, for sizing losses.
Frequently asked questions
What is a good ROI?
It depends on the time period and the risk taken. As a reference point, broad stock market index funds have historically returned roughly 7–10% annually over long periods, while savings accounts return far less with far less risk. Always compare annualized figures over similar periods — a raw ROI percentage without a time frame is not comparable to anything.
What is the difference between ROI and CAGR?
ROI is the total percentage return over the whole holding period, regardless of length. CAGR (compound annual growth rate) is the equivalent steady yearly rate that would produce the same result — it is what the Annualized ROI tab calculates. ROI tells you how much you made; CAGR tells you how fast.
Can ROI be negative?
Yes — a negative ROI means a loss. If you invested $5,000 and got back $4,250, your ROI is −15%. The worst possible ROI on an unleveraged investment is −100%, a total loss. The calculator shows losses in red and accepts negative ROI values in the solver.
Why is my annualized ROI so high for a short period?
Annualizing extrapolates: a 10% gain in three months becomes about 46% per year, because the math assumes the same pace continues for a full year. That rarely happens. For periods under a year the calculator shows a caution note — treat short-period annualized figures as a projection, not a track record.
Does ROI include dividends, fees, and taxes?
Only if you include them in the amounts. Add dividends, interest, or rent received to the returned amount for total return; subtract fees and taxes from it for a net figure. The formula itself just compares what went in with what came out.