Finance & Business
ROI Calculator
Calculate and analyze your Return on Investment (ROI) to make informed investment decisions
Enter investment details to calculate ROI
Related to ROI Calculator
The Return on Investment (ROI) calculator helps you evaluate the profitability and efficiency of your investments by comparing the gain or loss from an investment relative to its cost. The calculator uses two main formulas to provide comprehensive insights into your investment performance:
Total ROI Formula
Total ROI = ((Final Value - Initial Investment) / Initial Investment) × 100%
Annualized ROI Formula
Annualized ROI = (((Final Value / Initial Investment)^(1/Time Period)) - 1) × 100%
The calculator takes three key inputs: your initial investment amount, the final value of the investment, and the time period in years. It then calculates both the total ROI and the annualized ROI, providing a clear picture of your investment's performance. The annualized ROI is particularly useful for comparing investments over different time periods.
The ROI calculator provides three key metrics and a visual representation of your investment growth:
Total ROI
This percentage shows your overall return on investment. A positive percentage indicates a profit, while a negative percentage indicates a loss. For example, a 50% ROI means you've earned half of your initial investment as profit.
Annualized ROI
This metric shows your average yearly return, making it easier to compare investments with different time periods. For instance, an annualized ROI of 10% means your investment grew by an average of 10% each year.
Net Profit
This is the absolute monetary gain or loss from your investment, calculated as the difference between your final value and initial investment. It represents your actual profit or loss in currency terms.
The growth chart visualizes how your investment value changes over time based on the annualized ROI. This can help you understand the power of compound growth and make more informed investment decisions.
1. What is a good ROI percentage?
A "good" ROI varies depending on the investment type, risk level, and market conditions. Generally, annual returns of 7-10% are considered good for long-term stock market investments, while real estate might target 10-15%. However, higher-risk investments might require higher ROIs to justify the risk.
2. Why is annualized ROI important?
Annualized ROI is crucial for comparing investments with different time periods. It converts the total return into a yearly rate, making it easier to evaluate and compare various investment opportunities on an equal time basis.
3. Does ROI account for risk?
No, ROI alone doesn't account for investment risk. It's a purely financial metric that measures returns. To evaluate risk-adjusted returns, you should consider additional metrics like the Sharpe ratio or standard deviation of returns.
4. How often should I calculate ROI?
For long-term investments, calculating ROI quarterly or annually is usually sufficient. However, active traders might want to track ROI more frequently. Regular monitoring helps you assess whether your investments are meeting your financial goals.
5. What is the scientific source for this calculator?
This calculator implements standard financial mathematics principles recognized by the financial industry and academic institutions. The ROI formulas are based on fundamental investment performance metrics outlined in financial textbooks and used by professional financial analysts. The annualized ROI calculation uses the geometric mean method, which is the industry standard for calculating time-weighted returns, as documented in the CFA Institute's Global Investment Performance Standards (GIPS®). The calculations also align with methods described in financial mathematics literature, including "Investment Science" by David G. Luenberger and "Investments" by Zvi Bodie, Alex Kane, and Alan J. Marcus.