A 'good' ROI depends on the type of investment and time period. Stock market investments historically average around 7–10% annually (inflation-adjusted). Real estate commonly targets 8–12% annually. Business investments should generally exceed the cost of capital. Any positive ROI means the investment was profitable.

What is the difference between ROI and CAGR?

ROI is a simple ratio of profit to investment, which can be calculated for any time period. CAGR (Compound Annual Growth Rate) shows the consistent annual rate at which an investment would have grown to reach its final value — essentially the same as annualized ROI when applied to a single investment.

How do I calculate return on invested capital (ROIC)?

ROIC = Net Operating Profit After Tax (NOPAT) / Invested Capital. This is a business-level metric showing how efficiently a company generates returns from its capital. It differs from simple ROI in that it uses NOPAT rather than net profit and focuses on total capital invested by both equity and debt holders.

How does the ROI formula work for stocks?

For stocks, ROI = (Current Value + Dividends Received − Purchase Price) / Purchase Price × 100. Include dividends in the final value for a total return calculation. The annualized version accounts for how long you held the stock.

ROI Calculator – Return on Investment Calculator

Calculate ROI, profit, return multiple, and annualized rate of return instantly. Includes general, real estate, stocks, and business modes. Educational tool — not financial advice.

✓ Free instant calculator ✓ Annualized ROI included ✓ 4 industry modes ✓ Educational use

Industry Mode

Initial Investment

Final Value

Holding Period (years, optional)

Additional Costs

Purchase Price

Closing + Renovation Costs

Annual Gross Rent

Annual Operating Expenses

Annual Appreciation Rate

Holding Period (years)

Purchase Price (per share)

Current / Sale Price (per share)

Number of Shares

Total Dividends Received

Fees & Commissions

Holding Period (years)

Total Investment / Cost

Gross Revenue Generated

Cost of Goods / Variable Costs

Time Period (years)

Results — Educational Estimate Only

ROI

—

Net Profit

—

Return Multiple—

Annualized ROI—

Total Investment—

ROI Meter

ROI Formula

The return on investment formula is one of the most widely used metrics in finance. It measures how much profit you made relative to how much you invested:

ROI = (Final Value − Initial Investment) / Initial Investment × 100 ROI = (Net Profit / Cost of Investment) × 100

Step-by-Step Example

You invest $10,000 in a project. After two years, you receive $13,500.

Calculate profit: $13,500 − $10,000 = $3,500
Divide by investment: $3,500 / $10,000 = 0.35
Convert to %: 0.35 × 100 = 35% ROI

Annualized ROI = [(1 + ROI/100)^(1/years) − 1] × 100 = [(1.35)^(0.5) − 1] × 100 ≈ 16.2% per year

Alternative ROI Formulas

Net Profit ROI

ROI = Net Profit / Investment × 100

Best for business projects where you know the net profit figure directly.

Real Estate ROI (Cash-on-Cash)

CoC ROI = Annual Net Cash Flow / Total Cash Invested × 100

Measures annual cash income as a percentage of total cash down payment and costs.

Return on Invested Capital (ROIC)

ROIC = NOPAT / Invested Capital × 100

Used for business analysis — measures how efficiently all invested capital (debt + equity) is being used.

Adjusted ROI (with time value)

Adj. ROI = [(FV/PV)^(1/n) − 1] × 100

Computes the compound annual growth rate (CAGR) — equivalent to annualized ROI.

ROI vs IRR vs CAGR — What's the Difference?

Metric	What It Measures	Best For	Accounts for Cash Flow Timing?
ROI	Total profit as % of investment	Simple, one-time investments	No
Annualized ROI / CAGR	Per-year equivalent growth rate	Comparing investments of different durations	No
IRR	Discount rate making NPV = 0	Multi-year projects with irregular cash flows	Yes
ROIC	Efficiency of all invested capital	Business & equity analysis	No (uses annual figures)
NPV	Present value of all future returns	Capital budgeting decisions	Yes

💡 Rule of thumb: Use basic ROI for a quick check. Use annualized ROI / CAGR when comparing investments held for different time periods. Use IRR when cash flows occur at multiple irregular points in time.

ROI Examples by Industry

🏠 Real Estate Example: $300K Rental Property

Purchase Price$300,000

Closing + Renovation$15,000

Annual Gross Rent$24,000

Annual Operating Expenses$8,000

Annual Net Income$16,000

Cash-on-Cash ROI5.1% / year

📈 Stock Example: 100 Shares at $50

Total Investment$5,000

Sale Value (@ $75/share)$7,500

Dividends Received$240

Total Return$2,740

ROI (3 years)54.8% total / ~15.8% annualized

💼 Business Example: Marketing Campaign

Campaign Cost$10,000

Revenue Attributed$35,000

Cost of Goods$14,000

Net Profit$11,000

Marketing ROI110%

📊 General Example: $20K Investment over 5 Years

Initial Investment$20,000

Final Value$31,000

Total ROI55%

Annualized ROI (CAGR)~9.2% per year

How to Interpret Your ROI

Negative

Loss — investment returned less than its cost

0–10%

Low — below most benchmarks; consider alternatives

10–25%

Moderate — acceptable for many investments

25–50%

Good — strong return, above average

50–100%

Excellent — high performer

100%+

Exceptional — doubled or more

⚠ Context matters: A 30% ROI over 10 years (≈ 2.6% annualized) is actually poor. A 30% ROI in 1 year is outstanding. Always annualize ROI to compare across different time horizons.

ROI: Strengths and Limitations

✓ Strengths

Simple and universally understood
Easy to compare across different investment types
Works for any type of investment or project
Helps prioritize competing opportunities
No specialized knowledge required
Effective for quick go/no-go decisions

✗ Limitations

Ignores timing of cash flows (use IRR instead)
Doesn't account for inflation or time value of money
Simple ROI doesn't compare investments of different durations fairly
Can be manipulated by cherry-picking the time period
Doesn't capture risk — high ROI may mean high risk
Doesn't factor in opportunity cost of alternative investments

💡 Best practice: Always use annualized ROI (CAGR) when comparing investments held for different time periods. Pair ROI with a risk measure (standard deviation, max drawdown) for a fuller picture.

Frequently Asked Questions About ROI

What is the ROI formula?

ROI = (Final Value − Initial Investment) / Initial Investment × 100. Or equivalently: (Net Profit / Cost of Investment) × 100. Enter your values into the calculator above for an instant result.

How do I calculate ROI?

Subtract your initial investment from the final value to find profit. Divide that profit by the initial investment. Multiply by 100 to get a percentage. Use the annualized formula to account for how long you held the investment.

What is a good ROI?

It depends on the investment type and duration. The S&P 500 historically returns around 10% annually before inflation. Real estate commonly targets 8–12% annually. Any ROI above your cost of capital is considered value-creating. Negative ROI means a loss.

What is annualized ROI?

Annualized ROI converts a total return into a per-year rate. Formula: [(1 + ROI/100)^(1/years) − 1] × 100. This lets you fairly compare a 3-year investment against a 10-year one. It is also called CAGR (Compound Annual Growth Rate).

What is the difference between ROI and IRR?

ROI measures total return as a simple percentage of investment. IRR is the discount rate that makes the net present value of all cash flows equal zero. IRR accounts for when cash flows occur, making it better for complex multi-year projects with multiple payment dates.

What is ROI vs CAGR?

CAGR (Compound Annual Growth Rate) is the annualized version of ROI. While ROI shows the total return over any period, CAGR expresses that as a consistent annual rate. A 55% ROI over 5 years equals a CAGR of about 9.2% per year.

How do you calculate real estate ROI?

Real estate ROI = (Annual Net Income + Appreciation) / Total Investment × 100. Net income = Gross rent − vacancy − operating expenses − debt service. Total investment = purchase price + closing costs + renovation. The calculator above handles this automatically in Real Estate mode.

What is return on invested capital (ROIC)?

ROIC = Net Operating Profit After Tax / Invested Capital × 100. It measures how efficiently a company generates returns from all capital invested by shareholders and debt holders. A ROIC above the weighted average cost of capital (WACC) means the business creates value.

What is a negative ROI?

A negative ROI means the investment lost money. For example, $10,000 invested returning $7,500 = −25% ROI. It signals the investment destroyed value rather than created it, and it is time to evaluate whether to cut losses or wait for recovery.

What is the rate of return formula?

Simple rate of return = (Final Value − Initial Value) / Initial Value × 100. Annualized rate of return = [(Final / Initial)^(1/years) − 1] × 100. Both are equivalent to the ROI formula for individual investments.

How do I use the ROI formula for marketing?

Marketing ROI = (Revenue Attributed to Campaign − Campaign Cost) / Campaign Cost × 100. For example, $50,000 revenue from a $10,000 campaign = ($50,000 − $10,000) / $10,000 × 100 = 400% ROI. This can be done in Business mode in the calculator above.

When should I use ROI vs other metrics?

Use basic ROI for a quick one-time return check. Use annualized ROI / CAGR to compare investments of different durations. Use IRR for projects with multiple irregular cash flows. Use ROIC when evaluating a business's capital efficiency. Use NPV when making long-term capital allocation decisions.

Related Calculators

Disclaimer: This ROI Calculator is for educational and informational purposes only. Results are based on the inputs you provide and standard ROI formulas. They do not constitute financial, investment, or tax advice. Past returns do not guarantee future performance. Always consult a qualified financial advisor before making investment decisions.