Simple ROI Calculator

Initial Investment

Expected Final Value

Number of Years

Results

Enter values and calculate

What Is ROI and How to Calculate It?

Return on Investment (ROI) is one of the most common metrics used in finance to measure how profitable an investment is compared to its cost. Whether you’re evaluating a rental property, stock portfolio, small business, or marketing campaign, ROI helps you quickly see how much value you’re gaining from every dollar spent.

ROI Formula

The basic formula for calculating ROI is:

ROI (%)=Final Value−Initial ValueInitial Value×100ROI\,(\%) = \frac{Final\ Value - Initial\ Value}{Initial\ Value} \times 100

Example

Let’s say Miguelito invested $70,000 into a small start up, and over time his total profits reached $130,000.

ROI (%)=($130,000−$70,000)$70,000×100=86%ROI\,(\%) = \frac{(\$130{,}000 - \$70{,}000)}{\$70{,}000} \times 100 = 86\%

That means Miguelito ROI is 86%, showing his investment generated a 86% return on the original cost.

Why ROI Matters

ROI is popular because it’s:

  • Simple — anyone can calculate it, no finance degree required
  • Flexible — works for any type of investment (real estate, stocks, ads, or projects).
  • Comparable — lets you quickly compare multiple investment opportunities.

However, ROI has its limitations. It doesn’t account for time, risk, or cash flow patterns. For example, a 86% return over one year is much better than the same 86% over ten years — but ROI alone won’t show that difference.

Annualized ROI (or Annualized Return)

That’s where annualized ROI comes in. It adjusts your total ROI for the time period of the investment, letting you compare returns over different durations on an equal footing.

The formula for annualized ROI is:

Annualized ROI=(1+ROI)1n−1Annualized\ ROI = (1 + ROI)^{\frac{1}{n}} - 1

where n is the number of years the investment was held.

So if Miguelito’s 86% ROI came from an investment that lasted 2 years, his annualized ROI would be about 36% per year, which makes comparison with other 1-year investments more meaningful.

Key Takeaway

ROI is your starting point for analyzing profitability — quick, simple, and universally understood. For a more accurate picture of performance over time, it’s best to pair ROI with annualized ROI.

Use our ROI Calculator to see how your investment stacks up instantly and find your annualized ROI in just one click.