ROI Calculator

Calculate your Return on Investment (ROI) to evaluate the profitability of any investment, business decision, or marketing campaign. Get both basic and annualized ROI.

$
$
yrs

Return on Investment

+50.00%

Net Profit

$2,500

Annualized ROI

+22.47%

What is Return on Investment (ROI)?

Return on Investment (ROI) is a widely used financial metric that measures the profitability or efficiency of an investment relative to its initial cost. Whether you are buying stocks, starting a marketing campaign, or purchasing real estate, ROI tells you precisely how much value you gained (or lost) on your initial capital.

How to Calculate ROI

Calculating your basic ROI requires only two numbers: the Amount Invested and the Amount Returned (current value or final sale price). The standard ROI formula is as follows:

  • Net Profit = Amount Returned - Amount Invested
  • ROI (%) = (Net Profit / Amount Invested) × 100

What is Annualized ROI?

While standard ROI measures your total growth, it ignores the time it took to get there. For example, a 20% return over one year is excellent, but a 20% return over ten years is poor.Annualized ROI levels the playing field by calculating the equivalent geometric average return per year. This is crucial for comparing investments held for different lengths of time.

What is a "Good" ROI?

A "good" ROI depends entirely on your risk tolerance and the asset class:

  • Stock Market (S&P 500): Historically averages around 7% to 10% annualized ROI before inflation.
  • Real Estate: Often targets 8% to 12% annual returns depending on leverage and rental yields.
  • Savings Accounts & CDs: Generally offer much lower, but guaranteed and risk-free, returns (e.g., 2% to 5%).

Frequently Asked Questions

What is a good ROI for a typical investment?
A good ROI depends on the asset class and risk level. The S&P 500 has historically returned 7-10% annualized. Real estate typically targets 8-12%. Savings accounts offer 2-5% with lower risk. For marketing campaigns, a 5:1 ratio (400% ROI) is considered strong.
Why use annualized ROI instead of basic ROI?
Annualized ROI accounts for the time value of money. A 20% return over 1 year is excellent, but a 20% return over 10 years is poor (about 1.8% per year). Annualized ROI lets you compare investments with different holding periods on an equal footing.
Does ROI include risk?
No, ROI is a pure return metric and does not account for risk, volatility, or opportunity cost. Two investments with the same ROI can have very different risk profiles. Always consider risk factors alongside ROI when making investment decisions.
How is ROI different from profit margin?
ROI measures the return relative to the total investment amount. Profit margin measures the percentage of revenue that is profit. ROI is used for investment decisions, while profit margin is used for operational efficiency analysis of a business.

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