How this calculator works
Return on investment (ROI) measures how much an investment gained or lost relative to its cost. It is one of the simplest and most widely used profitability metrics because it needs only two numbers: what you put in and what you got back.
Simple ROI does not account for how long you held the investment, so a 50% ROI over one month and a 50% ROI over ten years look identical. Enter an optional holding period and this calculator also computes the annualized ROI, which converts the total return into an equivalent yearly rate so investments held for different lengths of time can be compared fairly.
The formula
ROI (%) = (Amount returned − Amount invested) ÷ Amount invested × 100Annualized ROI (%) = [(Amount returned ÷ Amount invested)^(1 ÷ years) − 1] × 100The annualized formula assumes a single lump-sum investment held for the full period, growing at a constant compounded rate — the same convention used by CAGR.
Worked example: $5,000 invested, $7,500 returned, 3-year hold
- Gain is $7,500 − $5,000 = $2,500.
- Simple ROI is $2,500 ÷ $5,000 = 50%.
- Over a 3-year holding period, the annualized ROI is (7,500 ÷ 5,000)^(1/3) − 1 ≈ 14.47% per year.
- Checking the annualized rate: $5,000 × (1.1447)^3 ≈ $7,500, which recovers the original total return.
Frequently asked questions
What is a good ROI?
It depends entirely on the asset class, risk, and time period, so there is no single benchmark. Comparing the annualized ROI against a relevant index or your cost of capital over the same period is more informative than the raw percentage alone.
Why does ROI need a holding period to be annualized?
Simple ROI treats a quick trade and a decade-long investment the same if the total percentage gain matches. Annualizing spreads that gain over the actual number of years so returns held for different lengths of time can be compared.
Does ROI include fees, taxes, or dividends?
Only if you include them in the amounts you enter. For a complete picture, use the total amount returned including any income received and net of any fees paid, not just the price change.
How is ROI different from CAGR?
ROI is the total percentage gain over the whole period; CAGR (and the annualized ROI here) is the constant yearly growth rate that would produce the same total gain. For a single lump-sum investment they use the same underlying formula.
Can ROI be negative?
Yes. ROI is negative whenever the amount returned is less than the amount invested, because the gain (amount returned minus amount invested) is negative, and dividing a negative gain by the amount invested still produces a negative percentage. A negative ROI simply means the investment lost money rather than made money.