ROI — return on investment — is the simplest performance metric in finance: how much did I make, relative to what I put in? It works for stocks, real estate, business projects, marketing campaigns and almost anything else with an identifiable cost and return.
The ROI Formula
Add a holding period and this calculator also gives you the annualized version — essential when comparing investments held for different lengths of time. A 60% total return over 8 years is not the same as 60% in 2 years.
Worked Example
Invest $10,000, receive $15,000 back after 3 years: total ROI is 50%, net gain is $5,000, and the annualized return is about 14.5% — close to double the annual pace of a typical stock index over the long run.
What ROI Doesn’t Tell You
ROI ignores time (unless you annualize), risk (a 20% return on a lottery ticket is not the same as 20% on an index fund) and opportunity cost (what else could that money have earned). It is a starting point, not a verdict.
Frequently Asked Questions
What is a good ROI?
It depends on risk, time and alternatives. Broad stock market indexes have averaged roughly 7–10% annualized before inflation over the long run.
ROI vs annualized return — which do I use?
Total ROI shows the whole gain; annualized return compares investments held for different periods on the same footing.
Does ROI include taxes or fees?
Only if you subtract them yourself — enter after-tax, after-fee returns for a realistic picture.