ROI Calculator

Calculate Return on Investment (ROI) and Compound Annual Growth Rate (CAGR). Analyze net profits and compare performance against major market benchmarks.

Investment Metrics

Live calculation
Initial acquisition or deployment cost
$
Final liquidation price + total dividends
$
Length of time capital was invested
years
Total Return on Investment
+50.00%
Annualized Compound Yield (CAGR)
+22.47% / yr

Standardized geometric yearly growth

Investment Multiple (MOIC)
1.50x

Ratio of capital returned to initial investment

What is Return on Investment (ROI)?

Return on Investment (ROI) is the universal financial metric used by retail investors, portfolio managers, corporate executives, and real estate developers to evaluate the economic efficiency or profitability of a financial asset. It measures the net financial gain relative to the original capital risked.

1. Basic Cumulative Return on Investment (ROI)
ROI (%)=
Final Value (Returned) - Initial Cost (Invested)Initial Cost (Invested)
× 100
2. Annualized ROI (Compound Annual Growth Rate / CAGR)
Annualized ROI (%)=[ (1 + ROI ÷ 100)1n- 1 ] × 100

where n represents the holding duration in years.

Step-by-Step Calculation Breakdown
Step 1: Baseline Inputs ($5,000 Invested, $7,500 Returned, 2.0 Years)
Cost = $5,000.00 | Return = $7,500.00 | Net Profit = $7,500 - $5,000 = $2,500.00
Step 2: Solve Cumulative Percentage ROI
ROI=
$2,500$5,000
× 100=+50.00% Total Return
Step 3: Solve Annualized CAGR (over 2 Years)
CAGR=(1.50)1/2 - 1=1.2247 - 1=+22.47% / year

Historical Asset Class Performance Benchmarks

Asset ClassHistorical Annualized ROIRisk Profile & Horizon
S&P 500 Index (Equities)~10.0% / yearModerate/High volatility. Best for 5+ year holding horizons.
Residential Real Estate~8.5% / yearIlliquid; combines property appreciation with net cash flow dividends.
Investment-Grade Bonds~5.2% / yearLow/Moderate risk; fixed interest income stability.
High-Yield Savings & US T-Bills~4.0% – 5.0%Zero principal risk; FDIC / US sovereign backed.

Frequently Asked Questions

What is the difference between Simple ROI and Annualized ROI?
Simple ROI measures total cumulative return regardless of how many years the investment was held. A 50% simple return over 10 years equals ~4.14% per year, while 50% over 2 years equals 22.47% per year. Annualized ROI calculates the geometric compound annual growth rate (CAGR), enabling fair head-to-head comparisons across different holding horizons.
What is considered a 'good' annual ROI?
Historical benchmarks: S&P 500 index funds average roughly 10% annualized before inflation (~7% real); residential real estate averages 8–12% including rental yields; high-yield savings and short-term US Treasuries offer 4–5% risk-free. A return above 10% annually with managed risk is considered strong.
Does ROI take taxes and inflation into account?
Basic ROI formulas calculate nominal gross return before capital gains taxes and inflation. Real (purchasing power) return is calculated as: Real Return ≈ Nominal ROI - Annual Inflation Rate.
How do dividends or rental income affect ROI?
Any ongoing cash distributions (such as quarterly stock dividends or monthly net rental cash flow) should be added to the 'Amount Returned' (Final Value) to capture total holding period return (Total Return = Capital Gain + Cash Distributions).

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