Investment ROI Calculator
Calculate the return on investment (ROI) and annualized return for any investment. Compare different investments and make smarter financial decisions.
How to Calculate ROI
Return on Investment (ROI) measures the profitability of an investment. The formula is simple: ROI = (Final Value - Initial Investment) / Initial Investment x 100
Understanding Annualized Return
Annualized return shows what your return would be if the investment grew at a steady rate every year. This makes it easier to compare investments with different time periods.
What Affects Your Real ROI?
- Fees and commissions — Trading fees, management fees, and expense ratios eat into returns
- Taxes — Capital gains taxes reduce your actual returns
- Inflation — A 10% nominal return with 3% inflation is only 7% in real terms
- Dividends — Reinvested dividends significantly boost long-term returns
Frequently Asked Questions
How do I calculate return on investment (ROI)?
ROI = (Current Value - Initial Investment) / Initial Investment × 100%. For example: invested $10,000, now worth $12,500, ROI = ($12,500 - $10,000) / $10,000 × 100% = 25%.
What is a good ROI percentage?
A 'good' ROI depends on the investment type and risk level. Savings accounts: 4-5%, Bonds: 5-7%, Stocks: 7-10% historically. Real estate: 8-12%. High-risk investments should yield 15%+. Always compare similar-risk investments.
What's the difference between ROI and annualized return?
ROI measures total return over an entire period. Annualized return (CAGR) measures the average yearly return as if growth was steady. A 50% ROI over 5 years = 8.45% annualized return, which is more useful for comparison.
How do fees affect my investment returns?
Fees compound against you. A 1% annual fee reduces a 30-year portfolio by ~22%. A 2% fee reduces it by ~40%. Always compare net returns (after fees) when evaluating investments.
Should I calculate ROI before or after taxes?
Always calculate pre-tax ROI first. After-tax ROI depends on your income bracket, investment type (taxable vs tax-advantaged), and how long you hold. Tax-advantaged accounts (401k, IRA) can dramatically improve after-tax returns.