What is a ROI Calculator?
Return on investment is the gain divided by what you put in. It is the most quoted number in business and the least comparable, because on its own it says nothing about how long the money was tied up.
Enter the amount invested, the amount returned and how long you held it. The tool returns the plain ROI, the gain, and the annualised return.
Forty percent over one year and forty percent over five years are the same ROI and completely different investments. The annualised figure divides the return across the holding period and is the only one of the two you can use to compare options.
Frequently asked questions
How is ROI calculated?
Subtract the amount invested from the amount returned, divide by the amount invested, and multiply by a hundred. A return of 160000 on 100000 invested is a 60 percent ROI.
What is annualised ROI?
The constant yearly rate that would have produced the same result over the holding period. It is the same idea as CAGR, and it is what makes a three year investment comparable with a one year one.
Does ROI account for risk?
No, and that is its main limitation. Two investments with the same return are not equivalent if one could plausibly have lost everything. ROI measures what happened, not what might have.
Should I include costs in the amount invested?
Yes. Fees, brokerage, taxes and the cost of your own time all reduce the real return, and leaving them out is how a mediocre investment starts looking good.