ROI calculator
What you put in, what you got back, and - if you tell it how long the money was tied up - the annualized rate that makes a 4-year return comparable to a 1-year one.
Why these starting numbers? The default figures are round illustrative numbers. The assumption worth attention is the holding period, because that is what converts a total return into an annualised one, and a total return quoted without a period is close to meaningless.
What is the difference between total and annualized ROI?
Total ROI is the simple one: gain divided by cost. Turn $50,000 into $65,000 and the ROI is 30.00% whether it took one year or ten. That is exactly why it misleads on its own - a 30% return over 4 years is a very different investment from 30% in one. The annualized figure fixes that: it is the single compound rate that would produce the same result over the same period, 6.78% per year in that example. When comparing investments held for different lengths of time, compare the annualized numbers.
What does this deliberately leave out?
ROI here is before tax, before inflation, and blind to risk - a 30% return from a lottery ticket and from a term deposit read identically. It also ignores cash flows along the way: if money went in or came out at different times, the honest metric is IRR, and the NPV & IRR calculator solves it from the actual dated flows.
Common questions
What is ROI and how is it calculated?
Return on investment is the gain divided by what you put in: (amount returned minus amount invested) divided by amount invested, shown as a percentage. Put in $50,000 and get back $65,000 and the ROI is 30% - it does not need a timeframe to calculate, which is also its biggest limitation.
What is the difference between total ROI and annualized ROI?
Total ROI ignores how long the money was invested; annualized ROI turns that total into a yearly rate so returns over different lengths of time become comparable. A 30% total return over 4 years annualizes to 6.78% a year - a very different result from 30% earned in a single year, even though the total ROI figure looks identical for both.
What is the difference between ROI and IRR?
ROI compares one lump sum in to one lump sum out. IRR is built for cash flows that move in and out at different times. If your investment only had a single start and a single end, ROI and annualized ROI answer the question; if money moved more than twice, IRR is the honest metric.
Why does averaging yearly returns give a different answer than the annualized rate?
Because a simple average ignores compounding. An investment that goes up 50% one year and down 50% the next averages to 0% arithmetically, but the real outcome is a 25% loss: $100 becomes $150, then falls 50% to $75. The annualized rate reflects what actually happened; the arithmetic average does not.
What counts as a good ROI?
It depends on what you are comparing it to. For long-run, diversified stock market investing, annualized returns of roughly 7-10% after inflation are the widely cited historical benchmark.
Does ROI account for tax, inflation, or risk?
No - the ROI shown here is before tax, before inflation, and blind to risk entirely. Treat it as the mechanical starting point, not the full picture.
For general information and education only. This tool shows an illustration based on the figures you enter - it does not know your circumstances, tax position, or appetite for risk, and nothing here is financial, investment, tax, or legal advice. It is not intended to be relied on when making a decision about any particular financial product. Before acting, check the figures against your own documents and consider advice from a licensed financial professional in your country.