How to calculate ROI
Return on investment (ROI) is your profit as a percentage of what you put in: ROI = (Final value − Amount invested) ÷ Amount invested × 100. Turn 10,000 into 15,000 and your ROI is 50%. It's the simplest way to compare how well different investments performed.
Why annualized return (CAGR) matters more
A 50% total return sounds great — but over what time? Earned in 1 year it's excellent; over 10 years it's modest. Annualized return (CAGR) smooths it into a per-year figure so you can compare fairly: CAGR = (Final ÷ Initial)^(1 ÷ years) − 1. As a benchmark, broad stock markets have historically averaged roughly 7–10% a year.
What ROI leaves out
- Fees and taxes — subtract them from your final value for a true picture.
- Inflation — a 6% return during 6% inflation is 0% in real buying power (see the inflation calculator).
- Risk — a high ROI on a risky bet isn't the same as a steady one.
Can ROI be negative?
Yes — if your investment is worth less than you paid, ROI is negative (a loss). Enter a smaller "returned" value to see it.
ROI vs CAGR — which should I use?
Use total ROI for a quick headline, and CAGR to compare investments held for different lengths of time. CAGR is the fairer number.
Should I include dividends or extra income?
Yes — add any income received to your "amount returned" so the ROI reflects your total gain.