Return on Investment (ROI) Calculator
Whether you made a quick stock trade or held real estate for a decade, knowing your return on investment is essential. Use these free calculators to find your simple ROI, annualized return (CAGR), and total stock ROI including dividends—then compare up to three investments side by side.
Simple ROI Calculator
Enter your initial investment and final value to calculate the basic return on investment percentage and dollar gain or loss.
Annualized ROI Calculator (CAGR)
Calculate your compound annual growth rate. This adjusts total ROI for the holding period, giving you a true year-over-year return.
Stock Investment ROI Calculator
Calculate the total return on a stock investment, including dividends received and trading commissions for a complete picture.
ROI Comparison Tool
Compare up to 3 investments side by side to see which performed best on both a total and annualized basis.
Investment A
Investment B
Investment C
ROI by Asset Class Over 20 Years
How $10,000 grows across different asset classes based on historical average annual returns, compounded over 20 years.
$10,000 Invested at Different ROI Rates Over 30 Years
The power of compounding: even small differences in annual ROI create massive divergence over time.
What Is ROI? The Return on Investment Formula Explained
Return on Investment (ROI) is one of the most widely used financial metrics. It measures how much money an investment earned (or lost) relative to how much it cost. The formula is straightforward:
For example, if you invest $10,000 and it grows to $13,000, your ROI is:
Limitations of Simple ROI
- Ignores time: A 30% return in 1 year is vastly different from 30% over 10 years. Simple ROI treats them the same.
- Ignores risk: Two investments may both return 15%, but one might involve far more volatility and downside risk.
- No inflation adjustment: A 5% ROI during 4% inflation means only ~1% real return.
- Ignores cash flow timing: ROI doesn't distinguish between getting returns early vs. late in the holding period.
When to Use Annualized ROI (CAGR)
Whenever you compare investments held for different lengths of time, use CAGR (Compound Annual Growth Rate). It normalizes returns to a per-year basis:
A 50% total return over 5 years becomes only 8.4% annualized—a much more honest picture than the headline 50% number.
ROI vs IRR vs CAGR vs ROE: Which Metric to Use
ROI is just one of several return metrics. Choosing the right one depends on what you're measuring.
| Metric | What It Measures | Accounts for Time? | Best Used For |
|---|---|---|---|
| ROI | Total % return on cost | No | Quick snapshot of profitability |
| CAGR | Annualized compound growth rate | Yes | Comparing investments held different periods |
| IRR | Discount rate making NPV = 0 | Yes | Projects with irregular cash flows |
| ROE | Return on shareholders' equity | Annual | Evaluating company profitability & management |
5 Key ROI Insights Every Investor Should Know
Time Transforms Returns
A 100% ROI sounds incredible, but if it took 15 years, that's only 4.7% annualized—barely beating inflation. Always ask "over how long?" before celebrating an ROI number.
Compounding Is the Real Magic
At 10% annual ROI, $10,000 becomes $67,275 in 20 years and $174,494 in 30 years. The growth accelerates as returns earn their own returns—Einstein's "eighth wonder of the world."
Include All Costs
True ROI accounts for commissions, fees, taxes, and inflation. A fund returning 8% with a 1.5% expense ratio delivers only 6.5%—and after 2.5% inflation, your real return is just 4%.
Don't Forget Dividends
Roughly 40% of the S&P 500's total historical return came from reinvested dividends. Ignoring dividend income can drastically understate your true stock ROI.
Use the Right Metric
Simple ROI for quick checks, CAGR to compare across time periods, IRR for irregular cash flows, and risk-adjusted returns (Sharpe ratio) when risk matters. No single number tells the whole story.
Frequently Asked Questions About ROI
What is ROI and how do you calculate it?
ROI (Return on Investment) measures the percentage gain or loss on an investment relative to its cost. The formula is: ROI = ((Final Value − Initial Investment) / Initial Investment) × 100. For example, investing $10,000 and selling for $13,000 gives an ROI of 30%.
What is the difference between ROI and annualized ROI (CAGR)?
Simple ROI shows total return regardless of time. Annualized ROI (CAGR) adjusts for time, showing the equivalent yearly growth rate. A 50% total return over 5 years is only about 8.4% annualized—a crucial distinction for comparing investments held for different periods.
How do you calculate ROI on stocks with dividends?
Total stock ROI includes capital gains plus dividends minus costs: ROI = ((Sell Price − Buy Price) × Shares + Dividends − Commissions) / ((Buy Price × Shares) + Commissions) × 100. This gives the true total return including income received.
What is a good ROI percentage?
A "good" ROI depends on the asset class and risk. The S&P 500 has historically returned about 10% annually before inflation. Bonds average 5%, real estate 8%. Any investment consistently beating its benchmark with appropriate risk is considered a good ROI.
What are the limitations of using ROI?
ROI does not account for time (use CAGR instead), risk, opportunity cost, inflation, or taxes. Two investments with the same ROI may have vastly different risk profiles. Always consider ROI alongside other metrics like IRR, Sharpe ratio, and risk-adjusted returns.