ROI Calculator
Calculate total ROI percentage, annualized return (CAGR), and absolute gain or loss for any investment.
How to use this roi calculator
- 1Enter the amount you originally invested.
- 2Enter the current or final value of the investment.
- 3Enter how many years you held the investment.
- 4Use Total ROI for absolute performance measurement.
- 5Use CAGR (annualized return) to compare investments held for different time periods.
How it's calculated
ROI = (final − cost) ÷ cost × 100. CAGR = (final ÷ cost)^(1÷years) − 1.
About the ROI Calculator
Return on investment is the universal language of financial performance, but its simplicity can obscure important nuances. Understanding what ROI measures and what it misses is essential for making sound investment comparisons.
The most important limitation of total ROI is that it ignores time. A real estate investment that returns 200% ROI over 30 years sounds impressive, but it corresponds to only a 3.7% CAGR — below the rate of inflation and well below stock market returns over the same period. Always convert total ROI to annualized CAGR for any investment held longer than one year, and use CAGR as the primary comparison metric.
Risk-adjusted return is the next level of analysis. Two investments might offer the same 12% CAGR — one with stable, predictable returns from diversified real estate, another from a single concentrated stock position with enormous volatility. The risk-adjusted return (often measured by Sharpe ratio for portfolios) tells you how much return you receive per unit of risk. Higher risk demands higher expected returns to be rational.
For individual investors, the most practical ROI lesson is the cost of fees and taxes. An investment fund charging 1% annual fee versus 0.04% (available through index funds) costs 0.96% of your investment value every year — compounded over 30 years, that difference can reduce your final portfolio by 20–25%. Tax drag in taxable accounts similarly reduces real returns. Maximizing after-tax, after-fee returns is often more impactful than chasing higher pre-cost returns.
Frequently asked questions
What is the difference between ROI and CAGR?
ROI (Return on Investment) is the total percentage gain or loss over the entire holding period, regardless of time. CAGR (Compound Annual Growth Rate) is the smoothed annual rate that would produce the same total return over the holding period. ROI is useful for measuring total profitability of a single investment. CAGR is essential for comparing investments held for different lengths of time — a 100% ROI over 2 years (CAGR 41%) is far better than a 100% ROI over 10 years (CAGR 7.2%). Always quote and compare CAGR when time periods differ.
What is a good ROI?
Context determines what is 'good.' The S&P 500 has returned approximately 10% annually (CAGR) over the long run — this is a widely used benchmark. A real estate investment returning 12% CAGR including rental income and appreciation would be strong. A business investment should target 15–25%+ CAGR to compensate for the risk and effort involved. For comparison, high-yield savings accounts offer 4–5% and US Treasury bonds offer 4–5% with zero risk. Any investment must be evaluated against these risk-free alternatives — the extra return must justify the extra risk.
How do I calculate ROI for a rental property?
Real estate ROI includes both cash flow and appreciation. Cash-on-cash ROI = annual net rental income ÷ total cash invested × 100. For total ROI including appreciation: total return = (final sale price − purchase price + total net rental income) ÷ original cash invested × 100. Include all costs in your calculation: purchase price, closing costs, renovation, property management fees, maintenance, insurance, property taxes, and financing costs. Many investors make the mistake of excluding some costs, overstating actual ROI. Use a holding period of 5–10 years for meaningful real estate ROI analysis.
Should I use ROI or IRR for evaluating investments?
ROI and CAGR work well for investments with a single initial outlay and a single final value. IRR (Internal Rate of Return) is more appropriate when an investment has irregular cash flows — like a rental property with monthly income, or a business with quarterly distributions. IRR is the discount rate at which the net present value of all cash flows equals zero. For simple investments (buy stock, sell stock), ROI/CAGR is sufficient and easier to calculate and communicate. For complex multi-cash-flow investments, IRR provides a more accurate picture.