ROI Calculator

What is Return on Investment (ROI)?

Return on Investment (ROI) is a simple and widely used performance measure used to evaluate the efficiency or profitability of an investment. ROI tries to directly measure the amount of return on a particular investment, relative to the investment's cost.

The ROI Formula

The basic mathematical formula to calculate ROI is:
ROI = (Net Profit / Total Cost of Investment) × 100

Factoring in Costs

A common mistake when calculating ROI is forgetting to include Extra Costs. For example, if you buy stocks, you may pay a broker commission. If you buy a house, you pay agent fees, transfer taxes, and maintenance.

These extra expenses increase your Total Cost of Investment and decrease your Net Profit. This calculator allows you to enter these extra costs to give you an accurate, real-world ROI figure.

ROI vs. CAGR

Unlike CAGR (Compound Annual Growth Rate), ROI does not account for the holding period (time). A 50% ROI over one year is spectacular, but a 50% ROI over twenty years is very poor. It is often best to look at both ROI and CAGR to fully understand an investment's performance.