ROI Calculator
Enter your investment details to calculate total ROI and annualized ROI (if you provide years).
Quick answer: the ROI formula
If you're asking, “how do I calculate return on investment,” the basic formula is simple:
This tells you what percentage you gained (or lost) compared to the money you originally put in.
Step-by-step: calculate ROI manually
1) Identify your initial investment
This is the amount of money you put in at the beginning. For example, buying stock for $10,000 means your initial investment is $10,000.
2) Determine your final value
This is what your investment is worth when you exit (or at the point you're measuring). If you sell for $12,500, your final value is $12,500.
3) Include additional costs
Many people forget this part. Include trading commissions, taxes, maintenance, software subscriptions, ad spend overhead, or transaction fees.
4) Run the calculation
Example:
- Initial investment: $10,000
- Final value: $12,500
- Additional costs: $300
Net profit = 12,500 - 10,000 - 300 = 2,200
ROI = (2,200 / 10,000) × 100 = 22%
How to interpret ROI results
- Positive ROI means you made money.
- Negative ROI means you lost money.
- 0% ROI means you broke even.
ROI is great for quick comparisons, but context matters. A 15% ROI in one month is very different from 15% over five years.
Annualized ROI: compare investments fairly
When investments have different time periods, annualized ROI gives a better apples-to-apples comparison.
Suppose your $5,000 investment becomes $6,650 after 3 years with no extra costs:
- Total ROI = (1,650 / 5,000) × 100 = 33%
- Annualized ROI ≈ 10% per year
Total ROI sounds impressive, but annualized ROI shows the real yearly pace of growth.
What should be included in “return” and “cost”?
Common returns
- Sale proceeds
- Dividends and interest
- Cash flow from rental or business projects
Common costs
- Purchase price
- Broker fees and commissions
- Taxes (when appropriate for your analysis)
- Repairs, maintenance, tools, and software
- Marketing spend and labor allocation in business projects
Common mistakes people make
- Ignoring costs: this overstates profitability.
- Comparing different timeframes without annualizing.
- Using revenue instead of profit for business ROI.
- Forgetting risk: high ROI may come with high volatility.
ROI for different use cases
Stock investing
Include buy/sell fees and dividends. Use annualized ROI for long holding periods.
Real estate
Include down payment, closing costs, repairs, financing effects, and rental income (if applicable).
Marketing campaigns
Use net profit attributable to the campaign, not just gross sales. A useful business formula is:
Final takeaway
The easiest way to answer “how do I calculate return on investment” is:
- Subtract all costs from your ending value.
- Subtract your initial investment to get net profit.
- Divide by initial investment.
- Multiply by 100 to get a percentage.
Use the calculator above for a fast result, and include years to estimate annualized performance for better decision-making.