ROI Calculator
Free ROI calculator. Calculate total return, annualized return (CAGR), and dollar profit on any investment from start value, end value, and time held.
Quick answer
ROI = (gain − cost) ÷ cost × 100%. Annualized return (CAGR) = (end ÷ start)^(1/years) − 1. Always compute CAGR alongside total return — a 100% return over 10 years (7.2% CAGR) is much weaker than 100% over 3 years (26% CAGR).
ROI Calculator
Returns
How it works
Total ROI = (final − initial) / initial. Annualized ROI (CAGR) = (final / initial)^(1/years) − 1. CAGR is the apples-to-apples return that lets you compare a 3-year investment to a 7-year one.
When to use it
Comparing investment options, evaluating whether a side hustle was worth the time, or deciding between two real estate flips with different hold periods.
Common mistakes
Comparing total returns across different time periods. A 50% return over 10 years (4.1% CAGR) is much worse than a 30% return over 3 years (9.1% CAGR), even though 50% > 30%.
How the ROI calculator works
Total ROI is the simple percent change: (end value − start value) ÷ start value × 100. CAGR (compound annual growth rate) is the annualized version: (end ÷ start) raised to the power of 1/years, minus 1, times 100. Total return tells you what you made; CAGR tells you the rate at which it grew. Both matter. A 50% return that took 10 years to earn (4.1% CAGR) is much weaker than a 50% return over 2 years (22.5% CAGR). The calculator computes both because either alone can mislead.
When to use it
Comparing investments held for different lengths of time — always reduce them to CAGR before comparing. Evaluating real estate vs. equities vs. business ventures. Computing the return on a side project or freelance contract net of time invested. Sanity-checking the 'returns' touted in marketing materials, which often quote total return on multi-decade products without annualizing.
Common mistakes
- Forgetting transaction costs. Real ROI is net of commissions, fees, taxes, and bid-ask spreads. A 20% gross gain in a taxable account at a 25% capital gains rate is 15% net.
- Comparing annualized to non-annualized returns. 'Stock A returned 80% and Stock B returned 30%' tells you nothing without timeframes.
- Ignoring time-weighted vs. money-weighted returns. If you added or withdrew money during the holding period, the simple ROI calculation is misleading. Use IRR or time-weighted return for portfolios with cashflows.
Frequently asked questions
How do you calculate ROI?
ROI = (final value − initial cost) ÷ initial cost × 100%. A $1,000 investment that grows to $1,500 has a 50% ROI. The formula doesn't account for time — see CAGR for the annualized rate.
What's a good ROI?
Context-dependent. The S&P 500 averages about 10% nominal / 7% real annually over long periods. Real estate averages 8-12%. Bonds 3-5%. Anything significantly higher than 10% over a long horizon usually involves higher risk or shorter timeframes.
What's the difference between ROI and CAGR?
ROI is the total percent change over a period of any length. CAGR is the equivalent constant annual growth rate. A 100% ROI over 10 years equals about 7.2% CAGR. Always annualize before comparing investments held for different periods.