ROI Calculator

Return on Investment (ROI) measures the gain or loss on an investment relative to its cost. The simple formula is (final value − initial value) ÷ initial value, expressed as a percentage. ROI is universally used to compare investments across asset classes — stocks, real estate, businesses, marketing campaigns — but the simple form ignores time, which makes annualized ROI essential.

Annualized ROI accounts for the holding period: a 50% return earned in 1 year is much better than 50% earned over 10 years. The formula is (final/initial)^(1/years) − 1. Always compare investments using annualized returns, not raw ROI, to avoid misleading conclusions.

The multiple on invested capital (MOIC) is common in private equity and venture capital. A 3x multiple means you tripled your money. Combined with annualized ROI, MOIC tells the whole story: a 3x in 4 years is excellent (~32% per year); a 3x in 20 years is mediocre (~5.6% per year).

Limitations: this calculation does not account for taxes, transaction costs, dividend reinvestment, or risk. Two investments with the same ROI can have very different risk profiles. For long-term planning, also consider inflation — a "real" ROI subtracts the inflation rate from your nominal annualized return.

Return on investment (ROI) is the most popular measure of investment efficiency because it is simple, intuitive and applicable to almost any context — stocks, real estate, marketing campaigns, training programs, business projects. The basic formula is (gain − cost) / cost, expressed as a percentage. A $1,000 investment that returns $1,250 has a 25% ROI. The simplicity is also the weakness: basic ROI ignores time, risk and the cost of capital.

Annualized ROI normalises returns across investments of different durations. A 25% return over 2 years is roughly 11.8% per year; a 25% return over 5 years is only 4.6% per year. The annualised figure lets you compare a real-estate flip held for 14 months against a stock held for 4 years on equal footing. This calculator computes both the raw and annualised figures so you can avoid being seduced by impressive-looking total returns earned over very long periods.

Risk-adjusted returns add another layer. The Sharpe ratio divides excess return (return above the risk-free rate) by standard deviation to penalise volatility. The Sortino ratio uses downside deviation instead, recognising that upside volatility is not a bad thing. Professional investors rarely rely on raw ROI for major decisions; they look at risk-adjusted metrics alongside ROI to understand whether the returns justify the volatility taken to earn them.

Marketing ROI (MROI) is a special case that often hides as much as it reveals. Attribution is hard — was the sale driven by the Facebook ad, the email, the podcast sponsorship or the friend's recommendation? Multi-touch attribution models help but are imperfect. Use this calculator for clean cases where the cost and the return are both unambiguous; for marketing decisions, supplement with incrementality testing and holdout groups before declaring victory.