How to calculate return on investment
Return on investment (ROI) measures how much your investment earned relative to what you put in. The formula is simple: ROI = (Ending Value − Amount Invested) ÷ Amount Invested. Enter those two numbers above and the calculator returns your total ROI percentage and the net gain in dollars.
Total ROI answers “how much did I make?” but ignores how long it took. If one investment returned 80% in 3 years and another returned 80% in 10 years, the total ROI is the same but the first is far better. That is why the calculator also shows your annualized return (CAGR) — the equivalent yearly rate that gets you from start to finish.
When you added money along the way — regular contributions each month — the annualized return switches automatically to a money-weighted return (IRR), which accounts for the timing of each deposit. This is the method used by investment professionals and gives a more accurate picture of your personal performance than a simple CAGR.
What is a good ROI?
The honest answer is: it depends entirely on what you are comparing it to. Broad U.S. stock market indexes have delivered roughly 10% per year in nominal terms over very long periods — about 7% after inflation. That is a common benchmark for equity investments.
A savings account or CD might return 4–5% today — much lower, but with essentially zero risk of loss. Real estate returns vary wildly by market and property. Private equity and venture capital target higher returns, with proportionally higher risk and illiquidity.
Use the “Beat the S&P?” chip in the What-If panel to see immediately whether your investment outperformed or underperformed the broad market over the same period. That is the most useful benchmark check for equity investments.
The hidden cost of fees on your ROI
A 2% annual expense ratio — common in actively managed mutual funds — shaves 2 percentage points off your effective return every single year. At a gross return of 8%, you net 6%. Over 20 years on a $50,000 investment, that difference compounds to tens of thousands of dollars in lost returns.
Index funds typically charge 0.03–0.20% per year. Enter your actual gross return above and hit the “After 2% fees” chip to see exactly what that drag costs you over your specific holding period. Most investors are surprised how large the number is.
Want to project future growth instead?
This calculator works backwards from a known result. To project what a current investment could grow to over time, use:
- Compound Interest Calculator → Model future growth with any contribution schedule.
- Investment Return Calculator → All three modes — ROI, projection, and S&P 500 backtest.
Frequently asked questions
How do you calculate ROI?
ROI (return on investment) = (Final Value − Total Amount Invested) ÷ Total Amount Invested, expressed as a percentage. If you invested $10,000 and it grew to $15,000, your ROI is ($15,000 − $10,000) ÷ $10,000 = 50%. The calculator above does this instantly and also shows your annualized return so you can compare investments held for different time periods.
What is a good ROI on an investment?
It depends on the asset class and time horizon. U.S. broad stock market indexes have averaged roughly 10% per year in nominal terms over long periods — that is a common benchmark for equities. Cash, CDs, and bonds offer lower but safer returns. A "good" ROI is one that fairly compensates for the risk and illiquidity you took on, relative to alternatives available at the time.
What is the difference between ROI and annualized return?
ROI is the total gain over the whole holding period, regardless of how long it took. Annualized return (CAGR) expresses that same gain as an equivalent yearly rate — so you can compare a 2-year investment to a 10-year one on equal terms. A 100% ROI over 5 years is a 14.87% annualized return; over 10 years the same 100% total is only a 7.18% annualized return.
What does a 200% ROI mean?
A 200% ROI means your investment tripled in value. If you invested $5,000 and it is now worth $15,000, your gain is $10,000 — which is 200% of the original $5,000 invested. Note: a 100% ROI doubles your money; 200% triples it. The confusion arises because people sometimes conflate "gain" with "final value."
Should I use ROI or annualized return to compare investments?
Always use annualized return (CAGR) when comparing investments held for different lengths of time. Total ROI ignores time entirely, so it is not a fair comparison across different holding periods. Use ROI as a quick headline number for a single investment; switch to annualized return the moment you want to compare two opportunities side by side.
Worked examples
Each result is computed by the same engine that powers the calculator. Return assumptions are historical averages or user-supplied planning figures — not predictions.
Angel investment — quick flip
$25,000 into an early-stage company, exited at $72,000 after 2 years.
- Starting value
- $25,000
- Ending value
- $72,000
- Holding period
- 2 yrs
- Total ROI
- 188.0%
A 188% total ROI looks spectacular but the 2-year holding period matters: annualized, it is a 69.7% CAGR — excellent for private equity but the high risk of early-stage investing warrants comparing the return to what the same capital could have earned in a diversified public portfolio.
Underperforming mutual fund
$50,000 in an actively managed fund, ending at $58,500 after 5 years.
- Starting value
- $50,000
- Ending value
- $58,500
- Holding period
- 5 yrs
- Total ROI
- 17.0%
A 17% total ROI over 5 years is only 3.26% CAGR — well below the S&P 500 benchmark at ~10% for the same period. The ROI headline of 17% sounds positive, but the annualized figure exposes that the fund significantly underperformed a passive index.
Brokerage account with monthly buys
$8,000 starting balance, $300/month added for 7 years, now worth $47,000.
- Starting value
- $8,000
- Ending value
- $47,000
- Holding period
- 7 yrs
- Total ROI
- 487.5%
- Monthly contribution
- $300/mo
- Money-weighted IRR
- 8.00%
When contributions are added, CAGR understates the true measure because it ignores when money arrived. The money-weighted return (IRR) is the correct figure — it accounts for each deposit's timing. This calculator computes it automatically when monthly contributions are entered.
ROI% by starting and ending value
Total ROI% for each starting value (rows) and ending value (columns). Quick reference for converting dollar amounts to a percentage gain.
| Starting value | $6K | $15K | $37.5K | $75K | $150K |
|---|---|---|---|---|---|
| $5K | 20.0% | 200.0% | 650.0% | 1400.0% | 2900.0% |
| $10K | -40.0% | 50.0% | 275.0% | 650.0% | 1400.0% |
| $25K | -76.0% | -40.0% | 50.0% | 200.0% | 500.0% |
| $50K | -88.0% | -70.0% | -25.0% | 50.0% | 200.0% |
| $100K | -94.0% | -85.0% | -62.5% | -25.0% | 50.0% |
ROI = (Ending − Starting) ÷ Starting. This table shows total ROI only — it does not account for holding period. See the hub for CAGR by time period.
What affects your results
These inputs move the needle most — ranked by their leverage on the final outcome. All rate inputs are user-supplied; this calculator does not access live market data.
ROI is a direct function of these two numbers: (exit − entry) ÷ entry. A 1% difference in entry price — buying at $9,900 vs $10,000 — changes your ROI by 1 percentage point across the entire holding period. Slippage, bid-ask spread, and purchase commissions all raise your effective entry price and reduce measured ROI.
ROI itself ignores time, but its meaning changes drastically with holding period. A 50% ROI in 1 year is extraordinary; over 20 years it is only 2.05% annualized — barely above inflation. Never cite ROI without stating the holding period alongside it.
Management fees, transaction costs, advisory fees, and taxes reduce your effective ending value. A 1% annual fee on a $50,000 position over 10 years costs roughly $6,700 in ending value at 7% returns — this is the ROI you never received. Always use the net (after-fee) ending value when entering the calculator.
Common mistakes to avoid
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Citing ROI without the holding period. "I made a 200% return" means something entirely different if it took 2 years vs. 15 years. Always state the time frame alongside any ROI figure.
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Using gross proceeds instead of net proceeds. If you sold a stock for $20,000 but paid $500 in commissions and $2,000 in taxes, your ending value for ROI purposes is $17,500 — not $20,000. ROI on the gross overstates your actual return.
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Comparing ROI% across different asset classes without considering risk. A 15% ROI on a venture investment and a 15% ROI on a bond ladder represent wildly different risk-adjusted outcomes. Sharpe ratio or other risk-adjusted measures are needed for a fair comparison.
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Applying ROI to a multi-phase project where cash flows out and in at different times. Use IRR instead — ROI is not designed for non-terminal cash flows.
Key takeaways
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Use ROI as the headline but always back it up with the annualized rate (CAGR). Total ROI is the simpler number to quote; CAGR is the honest comparison metric.
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For any investment that received additional cash injections, switch to IRR. The money-weighted return is the only measure that handles multiple contributions correctly.
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Compare your ROI against an appropriate benchmark for the same period — not just the S&P 500. If you held a 7-year corporate bond and earned 4% annualized, compare it to investment-grade bond index returns, not to equities.
More questions answered
What is the ROI formula?
ROI = (Final Value − Total Amount Invested) ÷ Total Amount Invested, expressed as a percentage. If you invested $10,000 and your investment is now worth $14,000, ROI = ($14,000 − $10,000) ÷ $10,000 = 40%. For investments with multiple cash flows (e.g. dividend reinvestment or recurring deposits), use IRR instead of simple ROI.
What does a 20% ROI mean?
A 20% ROI means your investment returned $0.20 for every $1 invested — a $10,000 position grew to $12,000. Whether that is good depends on how long it took: a 20% ROI in 1 year is outstanding (20% CAGR), but over 10 years it is only 1.84% annualized — below inflation. Context and holding period are essential.
What is the difference between ROI and net profit?
Net profit is the raw dollar gain: ending value minus starting value. ROI converts that gain into a percentage of the original investment so you can compare investments of different sizes. A $5,000 gain on a $10,000 investment (50% ROI) is a very different result from a $5,000 gain on a $200,000 investment (2.5% ROI), even though the dollar amounts are identical.
Should I use ROI or annualized return to evaluate my portfolio?
Both — for different questions. Use total ROI to quickly see how much you gained on a specific position. Use annualized return (CAGR) whenever you compare across investments held for different lengths of time, or when benchmarking against an index. The calculator shows you both at once.