Calculate your Return on Investment (ROI) to evaluate and compare the efficiency of different investments.
ROI Amount
$0
Annualized ROI
0%
Enter your investment details and click Calculate to see your ROI analysis.
| Metric | Investment A | Investment B | Better Option |
|---|---|---|---|
| Total ROI (%) | 0% | 0% | |
| Annualized ROI (%) | 0% | 0% | |
| Net Return ($) | $0 | $0 |
Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments. ROI measures the return of an investment relative to its cost. The formula for calculating ROI is:
ROI = (Net Return / Cost of Investment) × 100%
Where Net Return is the profit from the investment (Final Value - Initial Investment).
ROI helps you understand how well your investment is performing in percentage terms.
Compare different investment opportunities on a level playing field regardless of size.
Make data-driven decisions about where to allocate your investment capital.
The basic calculation that shows the total percentage return over the entire investment period.
Simple ROI = [(Final Value - Initial Investment) / Initial Investment] × 100%
Shows the average annual return of the investment, useful for comparing investments with different time horizons.
Annualized ROI = [(1 + Simple ROI)^(1/years) - 1] × 100%
Takes into account additional costs associated with the investment for a more accurate assessment.
Net ROI = [(Final Value - Initial Investment - Additional Costs) / Initial Investment] × 100%
There's no one-size-fits-all answer as a "good" ROI depends on various factors including the type of investment, risk level, and market conditions. Generally:
Compare your potential ROI with the risk level and what you could earn in alternative investments.
ROI (Return on Investment) measures the return relative to the total investment cost. ROE (Return on Equity) measures the return relative to the equity portion of the investment. For example, if you invest $100,000 in a property with a $20,000 down payment (equity) and earn $10,000, your ROI is 10% ($10,000/$100,000) but your ROE is 50% ($10,000/$20,000).
Annualized ROI is useful when comparing investments with different time horizons. For example, an investment with a 50% ROI over 5 years isn't directly comparable to one with a 20% ROI over 1 year. Annualized ROI converts the 5-year investment to an equivalent annual rate (about 8.45% per year), making it clear that the 20% 1-year investment actually performed better on a yearly basis.
To account for additional costs in ROI calculations, add them to your initial investment amount or subtract them from your final return. For example, if you invested $10,000 in stocks, paid $200 in broker fees, and sold for $12,000, your ROI would be:
ROI = [($12,000 - $10,000 - $200) / $10,000] × 100% = 18%
Not necessarily. While a higher ROI generally indicates a more profitable investment, it doesn't account for risk. Higher ROI investments often come with higher risk. It's important to consider the risk-return tradeoff—determine whether the potential higher return justifies the additional risk. Additionally, a high ROI in a short-term investment might be less valuable than a moderate ROI in a reliable long-term investment.