Calculate return on investment, net profit, and annualized returns.
ROI (Return on Investment) measures how profitable an investment is relative to its cost. A positive ROI means the investment made money; a negative ROI means it lost money. This tool calculates both simple ROI and annualized ROI for multi-year investments.
Annualized ROI uses compound annual growth rate (CAGR) to normalize returns over different time periods, making it easier to compare investments of different durations.
It depends on the context. The S&P 500 historically returns about 10% per year. Real estate averages 8-12%. A good ROI should at minimum beat inflation (2-4%) and ideally exceed what you could earn with a low-risk alternative.
Simple ROI shows total return regardless of time. Annualized ROI normalizes it to a yearly rate using CAGR, so you can compare a 2-year investment with a 5-year one on equal footing.
ROI = ((Final Value − Initial Investment) ÷ Initial Investment) × 100. For example, invest $10,000 and get back $13,000: ROI = (3,000 ÷ 10,000) × 100 = 30%.