About the ROI calculator
Return on investment (ROI) compares the profit from an investment with its cost. It is a quick way to compare projects, stocks, a business purchase or a renovation.
ROI alone ignores time: 50% in one year is far better than 50% in ten. The annualized ROI converts the total return into the equivalent steady yearly rate, so investments of different lengths can be compared fairly.
Formula
- ROI = (Amount returned − Amount invested) ÷ Amount invested × 100
- Annualized ROI = ((Amount returned ÷ Amount invested)^(1 ÷ years) − 1) × 100
Example
Investing $10,000 and getting $15,000 back after 3 years is a $5,000 profit, an ROI of 50%. The annualized ROI is 1.5^(1/3) − 1 = 14.471% a year.