Smarter Than Free calculator
ROI Calculator
Return on investment from cost and gain (or start and end value). Optional annualised ROI when you know the holding period.
Calculator
How is ROI calculated?
ROI % = (gain − cost) ÷ cost × 100, or (final − initial) ÷ initial × 100.
Is ROI the same as CAGR?
No. ROI is a single-period return. CAGR annualises a multi-year path.
Why can a high ROI still be a bad investment?
ROI ignores time and risk. A 25% gain is lovely in one year and a bit sad over twenty, and it says nothing about what you risked to get it. Compare the annualised figure with what the money could have earned elsewhere.
How do fees change ROI?
Add buying costs to the cost and take selling costs off the final value. Buying at £8,000 and selling at £10,000 is 25%. Pay £100 each way and it is 1,800 ÷ 8,100 = 22.22%.
What is a good ROI?
There is no universal number. A fair test is what the same money would have earned over the same period at similar risk. Beating a savings account by taking far more risk is not obviously a win.
Can ROI be worse than −100%?
If you only lose what you put in, −100% is the floor. With borrowed money or a short position you can lose more than your original stake, so the loss can go past it.
The same 25% ROI, held for different lengths of time
Annualised = 1.25^(1 ÷ years) − 1. The ROI does not change. How good it was does.
| Held for | Total ROI | Per year |
|---|---|---|
| 1 year | 25% | 25.00% |
| 2 years | 25% | 11.80% |
| 3 years | 25% | 7.72% |
| 5 years | 25% | 4.56% |
| 10 years | 25% | 2.26% |
| 20 years | 25% | 1.12% |
The formula
ROI = (final value − initial cost) ÷ initial cost × 100 Net profit = final value − initial cost Annualised ROI (compound): Annualised = (1 + ROI as decimal)^(1 ÷ years) − 1 Example: +50% over 2 years annualises to (1.5)^(0.5) − 1 ≈ 22.47% a year.
Worked example
You buy something for £8,000 and later sell for £10,000.
Net profit = 2000. ROI = 2000 ÷ 8000 × 100 = 25%.
Held for 2 years:
Annualised = (1.25)^(1/2) − 1 ≈ 11.80% a year.
ROI alone does not care how long you waited. Annualised ROI does. That is why two 25% wins can look very different.
Methodology
How it calculates
- Return on investment as gain relative to cost for a single period.
Formula
ROI = (final value − initial cost) ÷ initial cost × 100 Net profit = final value − initial cost Annualised ROI (compound): Annualised = (1 + ROI as decimal)^(1 ÷ years) − 1 Example: +50% over 2 years annualises to (1.5)^(0.5) − 1 ≈ 22.47% a year.
Assumptions
- Single-period ROI. Multi-year paths are usually clearer as CAGR.
Edge cases
- Negative ROI when final value is below cost.
Sources
None. Pure maths; no external rate or spec feed.
FAQ
Is ROI the same as CAGR?
No. ROI is the total percentage gain. CAGR is the smoothed yearly rate between two values. Annualised ROI here uses the same compound maths as CAGR when you only have a total return and a time span.
Should fees go into the cost?
If you want an honest number, yes. Add purchase fees to cost and subtract exit fees from the final value.
What about dividends or rent along the way?
Fold cash received into the final value (or treat them as reducing net cost). This tool is deliberately blunt: two money amounts and optional years.
Not financial advice. This calculator is for education only. Double-check results before you make money decisions. Past moves do not predict future ones.