Return on Investment (ROI) Calculator

Evaluate the profitability of your investments and make data-driven decisions.

Calculator

Enter Your Investment Details

Enter the total amount you plan to invest.

Enter the expected annual profit from your investment.

Enter the expected period for which you plan to hold the investment.

Table of Contents

1 ROI Formula
2 How to Calculate ROI
3 Calculating Annualized Return
4 ROI - Practical Examples
Concept

ROI Formula

Return on Investment (ROI) is a financial metric used to evaluate the profitability or efficiency of an investment. It measures the amount of return on a particular investment relative to its cost.

Formula:
ROI = ((Total Profit - Initial Investment) / Initial Investment) × 100%
Steps

How to Calculate ROI

To calculate ROI, follow these steps:

  1. 1
    Determine the initial investment amount
  2. 2
    Calculate the total profit (or loss) from the investment
  3. 3
    Subtract the initial investment from the total profit
  4. 4
    Divide the result by the initial investment
  5. 5
    Multiply by 100 to get the percentage

For example, if you invest $10,000 and earn $2,000 in profit, your ROI would be:

Example Calculation:
ROI = (($2,000 - $10,000) / $10,000) × 100% = -80%
Advanced

Calculating Annualized Return

Annualized ROI accounts for the time period of the investment, making it easier to compare investments with different time horizons.

Formula:
Annualized ROI = ((1 + ROI)^(1/n) - 1) × 100%

Where n is the number of years

For example, if you have a 50% ROI over 3 years, your annualized ROI would be:

Example Calculation:
Annualized ROI = ((1 + 0.5)^(1/3) - 1) × 100% = 14.47%
Examples

ROI - Practical Examples

Example 1 Stock Investment

You buy 100 shares of a stock at $50 per share ($5,000 total). After one year, you sell the shares for $60 per share ($6,000 total).

ROI = (($6,000 - $5,000) / $5,000) × 100% = 20%

Example 2 Real Estate Investment

You purchase a property for $200,000. After 5 years, you sell it for $250,000. During this time, you received $10,000 in rental income each year.

Total Profit = ($250,000 - $200,000) + ($10,000 × 5) = $100,000

ROI = ($100,000 / $200,000) × 100% = 50%

Annualized ROI = ((1 + 0.5)^(1/5) - 1) × 100% = 8.45%

Example 3 Business Investment

You invest $50,000 in a small business. The business generates $15,000 in profit each year. After 3 years, you sell your share for $65,000.

Total Profit = ($65,000 - $50,000) + ($15,000 × 3) = $60,000

ROI = ($60,000 / $50,000) × 100% = 120%

Annualized ROI = ((1 + 1.2)^(1/3) - 1) × 100% = 30%

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