Return on Investment (ROI) Calculator
Return on Investment (ROI) Calculator
Total value of the investment at the end (Principal + Gain).
Required to calculate Annualized ROI.
Report Bug In business and investing, "Profit" is an absolute number, but "ROI" is the measure of efficiency. Making $1,000 is great, but did it take an investment of $100 or $100,000? The Return on Investment (ROI) Calculator provides the answer. It is the universal metric used to evaluate the profitability of an expenditure relative to its cost.
Whether you are analyzing a Real Estate "Fix and Flip," a Google Ads campaign, or a stock portfolio, this tool reveals the true power of your capital allocation.
📈 The Efficiency Formulas (Simple vs. Annualized)
We use two distinct calculations. The Simple ROI tells you the total growth, while the Annualized ROI adjusts for time (CAGR), allowing you to compare short-term and long-term investments fairly.
Annualized: ROI = [(1 + Total ROI)^(1/n) - 1] × 100
Variables Defined:
- Revenue: The final value or total income generated.
- Cost: The total initial investment (including fees, repairs, etc.).
- n: Number of years the investment was held.
🏘️ Scenario: The "Real Estate Flip"
Let's simulate a classic US Real Estate investment. You buy a distressed property for $200,000, spend $50,000 on renovations (Total Cost: $250,000), and sell it exactly 1 year later for $325,000.
| Performance Metric | Financial Result |
|---|---|
| Total Invested Capital | $250,000.00 |
| Final Revenue (Sale Price) | $325,000.00 |
| Net Profit (Gain) | + $75,000.00 |
|
RETURN ON INVESTMENT (ROI)
30.00%
Verdict: Excellent (Beats S&P 500 average) |
|
Strategic Insight: A 30% ROI in one year is phenomenal. However, if this same project took 5 years to complete, the Annualized ROI would drop to roughly 5.4%, which is an average (mediocre) return. Time is money.
US Investment Benchmarks (What is "Good"?)
- Stock Market (S&P 500): Historically averages 7% - 10% annually (inflation-adjusted).
- Real Estate: Typically aims for 8% - 12% (Cash on Cash return) or 15%+ for development projects.
- High-Risk Venture: Angel investors often look for 10x (1,000%) ROI to offset the high risk of failure.
- CDs / Bonds: Considered "Risk-Free," usually offering 3% - 5% depending on Federal Reserve rates.
Frequently Asked Questions (FAQs)
Does ROI include taxes?
Standard ROI calculations are Pre-Tax. In the US, your "Real ROI" is lower after you pay Capital Gains Tax. Short-term gains (held <1 year) are taxed as regular income (up to 37%), while Long-term gains (>1 year) are taxed at lower rates (0%, 15%, or 20%).
What is the difference between ROI and ROE?
ROI measures the return on the total project cost. ROE (Return on Equity) measures the return on only the cash you put in. If you used a bank loan (leverage) to buy the house, your ROE might be 100% even if the project ROI is only 30%.
Can ROI be negative?
Yes. A negative ROI means you lost money. If you invest $100 and end up with $80, your ROI is -20%. Calculating negative ROI is crucial for knowing when to "cut your losses" (Stop Loss).
Why is Annualized ROI important?
It prevents the "Time Illusion." A 50% return sounds amazing, but if it took 10 years to achieve, that's only about 4% per year—barely beating inflation. Annualized ROI standardizes everything to a yearly rate for fair comparison.
Does this calculator account for inflation?
This is a "Nominal ROI" calculator. To find the "Real ROI," you must subtract the inflation rate. If your ROI is 8% but inflation is 3%, your Real Purchasing Power only grew by 5%.
