How ROI works
Return on investment expresses your gain or loss as a percentage of what you put in. Subtract the initial cost from the final value to get the net profit, then divide by the initial cost. A 20% ROI means you ended up with 20 cents of profit for every dollar invested; a negative ROI means you lost money.
The plain percentage is intuitive but blind to time. Earning 50% over six months is far better than earning 50% over ten years, yet both show the same ROI. Adding a holding period lets the calculator report an annualized return, which restates the gain as an equivalent steady yearly rate so investments of different lengths can be compared on equal footing.
Reading the result and the chart
ROI is the headline. Net profit is the same story in dollars rather than percent, and the annualized return — shown when you enter a holding period — is the figure to use when comparing this investment with others.
The bar chart sets the initial cost beside the final value so you can see at a glance whether the investment grew or shrank, and by roughly how much.
Tips and caveats
A clean ROI number can paper over important details.
- Include every cost — fees, commissions, taxes, and maintenance — in the initial cost, or your ROI will look better than reality.
- For anything held more than a year, lean on the annualized return rather than raw ROI when comparing options.
- ROI ignores risk. A high return earned by taking on large risk is not strictly better than a modest, safer one.
- It also ignores the timing of cash flows in between; for staggered contributions or payouts, an internal-rate-of-return measure is more accurate.
A note on scope
This calculator is for education and quick estimates, not financial advice. Results depend entirely on the figures you enter and do not predict future performance. Confirm the numbers and seek professional guidance before acting on them.
Formula
ROI = (finalValue − initialCost) / initialCost · 100; annualized = ((finalValue/initialCost)^(1/years) − 1) · 100