ROI Calculator

Return on Investment (ROI) is one of the most widely used financial metrics. It measures the profitability of an investment relative to its cost, expressed as a percentage. A positive ROI means you made money; a negative ROI means you lost money.

While total ROI tells you the overall gain or loss, annualized ROI normalizes the return to a yearly figure, making it possible to compare investments held for different periods of time on an equal basis.

This calculator uses two standard formulas:

The annualized formula uses the geometric mean to account for compounding, giving you the equivalent yearly growth rate as if your investment had grown at a steady pace each year.

What qualifies as a "good" ROI depends on the asset class and the risk you are taking. Here are common benchmarks:

• S&P 500 index: Historically averages roughly 10% per year (about 7% after inflation). This is often used as the baseline for equity investing.
• Real estate: Typical annual returns range from 8% to 12%, depending on location, property type, and whether rental income is included.
• Bonds: U.S. Treasury bonds average around 4% to 6% annually, offering lower returns in exchange for lower risk.
• Venture capital / startups: Target returns of 20%+ per year, reflecting the much higher risk of failure.

Always compare ROI against the risk-free rate and inflation. A 5% return sounds good, but if inflation is running at 4%, your real return is only 1%.

• Ignoring the time factor: A 50% total return over 10 years is only about 4.1% annualized. Always convert to annualized ROI before comparing investments held for different durations.
• Forgetting hidden costs: Brokerage fees, taxes, maintenance expenses, and inflation all reduce your real return. Make sure you use the net amount returned (after costs) for an accurate picture.
• Confusing ROI with cash flow: An investment can show a high ROI on paper but tie up your capital for years. Consider liquidity and opportunity cost alongside raw ROI.