ROI Calculator

Enter what you paid, what the investment is worth today, and how many years you held it. The calculator shows the net gain in money terms, the total return on investment as a percentage, and the annualized rate — the steady yearly return that would have grown the first number into the second. Everything updates as you type and nothing leaves your browser.

Where the measure came from

The phrase "return on investment" owes its place in business language to Donaldson Brown, who joined the DuPont company in 1909 as an explosives salesman and rose to become its treasurer. In 1914 he set out, in an internal efficiency report, a disciplined way of relating a division's profit to the capital tied up in it. His insight was to split the measure into two parts: the profit earned on each dollar of sales, multiplied by the number of times that capital turned over in sales during the year. Return on investment, in that scheme, equals profit margin times asset turnover — the identity still taught in accounting classes as the DuPont formula.

Measuring gain against the money staked was not new. Merchants, moneylenders and joint-stock traders had compared profit to capital for centuries. What Brown did was turn a rough intuition into a standard ratio that a large, complicated firm could apply consistently across very different operations. DuPont built the method into its reporting through the 1920s, and when the company took a large stake in General Motors, Brown moved across as GM's treasurer in 1921. Working alongside Alfred Sloan, he made the ratio central to the financial controls that held a sprawling, decentralized carmaker together, giving head office a single yardstick to compare units as unlike as engine plants and finance arms.

By the second half of the twentieth century the three letters had escaped the accounting department. "ROI" became shorthand for the payoff on almost any outlay — an advertising campaign, a training course, a new machine — which is why the same abbreviation now covers both a rigorous capital-budgeting calculation and a loose phrase thrown around in meetings. This tool keeps to the strict version: money in, money out, and the time between.

How the return is calculated

Two formulas drive the results. The first is the plain holding-period return, which measures the whole change in value from purchase to today without any reference to how long it took. The second is the compound annual growth rate (CAGR), the standard way of restating that same change as one steady yearly rate. Both are point-to-point measures: they read the opening value, the closing value and the elapsed time, and nothing else.

ROI = (final − initial) ÷ initial

annualized = (final ÷ initial)^1/t − 1

With the defaults, 12,000 grows to 15,600 over 3 years. The gain is 15,600 − 12,000 = 3,600, and 3,600 ÷ 12,000 = 0.30, a total ROI of 30%. The annualized rate is 1.3^1/3 − 1 ≈ 9.14%. You can verify it forwards: 12,000 × 1.0914 gives 13,097, compounding again gives 14,294, and a third year lands on 15,600. When the holding period is zero the annualized figure simply repeats the total ROI, since there is no time to spread it over.

The two results are bound together by one identity. One plus the total ROI equals the final value divided by the initial, and the annualized rate is the number that, compounded over the holding period, reproduces that same ratio. Raise one plus the annualized rate to the power of the years and you land back on one plus the total ROI. Over exactly one year the two are identical, because a single year of compounding is no compounding at all.

Total return says nothing about time

A 30% return sounds impressive until you ask how long it took. The same total return decays quickly as the holding period stretches:

Ten years to earn 30% trails an ordinary savings account in most rate environments. That is the whole reason the annualized line exists: it puts investments of different lengths on the same footing.

Why the annual rate is a geometric average

The annualized figure is a geometric mean, not a simple one, and that difference guards against a frequent error. Averaging yearly percentage returns arithmetically overstates what really happened whenever those returns bounce around. Take a holding that rises 50% in one year and falls 50% the next. The arithmetic average is zero, which suggests you broke even, yet a dollar becomes 1.50 and then 0.75 — a genuine loss of 25% across the two years. CAGR reports that honestly, at about −13.4% a year, because it is built from the actual start and end values rather than a string of percentages. Whenever returns vary, the geometric mean sits at or below the arithmetic one, and the two meet only when every year's return is identical.

Reading the annualized number

An annualized return means little on its own; it earns meaning next to an alternative. The fair comparison is what the same money could have made elsewhere over the same span — a savings rate, a government bond yield, or a broad market index. The figure is also nominal. If prices rose 3% a year while the investment grew 9% a year, the real gain in purchasing power was nearer 6%, and it is the real number that decides whether you came out ahead. Treat high returns over short windows with suspicion, because a fast start rarely holds; a single strong quarter, annualized, implies a pace almost nothing sustains.

What the calculation leaves out

The math is strictly point to point, so anything that happened in between is invisible. Fees and taxes are not deducted — enter net figures if you want a net answer. Dividends or rent are ignored unless you fold them into the final value. If you added money along the way, the result overstates performance, because part of the apparent gain is simply your own later contributions; a money-weighted return is the right tool for that case. Costs compound just like returns: a 1% annual fee against a 7% gross return leaves roughly a quarter of the final balance on the table after 30 years.

Taxes change the net answer by country

• US: long-term capital gains on assets held over a year are taxed at 0%, 15% or 20% depending on income; short-term gains at ordinary rates.
• UK: gains above the £3,000 annual exempt amount are taxable, but anything inside an ISA is free of capital gains tax entirely.
• EU: rules vary widely — Germany applies a flat 26.375% including the solidarity surcharge, while France's flat levy rose from 30% to 31.4% in 2026, when social contributions on capital income went from 17.2% to 18.6%.
• Canada: half of a capital gain is added to taxable income at your marginal rate.
• Australia: assets held for at least 12 months qualify for a 50% capital gains discount.

This tool is for estimation and education, not investment advice; past returns and simplified math say nothing about what an investment will do next. See the site disclaimer.

Frequently asked questions

How do you calculate ROI on an investment?

Subtract what you put in from what it is worth now, then divide by what you put in. An investment bought for 12,000 and now worth 15,600 has gained 3,600, and 3,600 ÷ 12,000 = 0.30, an ROI of 30%. Multiply the fraction by 100 to express it as a percentage.

What is a good annual return on investment?

The S&P 500 has returned roughly 10% a year on average over the past century, or about 7% after inflation, so consistently beating 7% real is genuinely hard. A high-yield savings account near 4% and a rental property netting 6–8% after costs are common reference points. Anything promising 20% a year with low risk deserves deep suspicion.

What is the difference between ROI and CAGR?

ROI is the total percentage change over the whole holding period; CAGR, the compound annual growth rate, converts that into a steady per-year rate. A 30% ROI earned over 3 years works out to a CAGR of 9.14%, because 1.0914 multiplied by itself three times is 1.30. Over exactly one year the two numbers are identical.

Does ROI include fees and taxes?

Not unless you build them in yourself. Use the amount actually invested after purchase fees as the initial value, and what you would keep after selling costs as the final value. Taxes are best handled separately because rates depend on country, income and holding period — a 20% capital gains tax on the default example's 3,600 gain would take 720.

How do I annualize a return of less than one year?

Use a fractional year: six months is 0.5, so a 5% gain in six months annualizes to 1.05² − 1 = 10.25%. Treat short-period annualizations with care, because they assume the same pace continues — a lucky month at 4% annualizes to roughly 60% a year, which almost no investment sustains.