Calculate return on investment from initial cost and final value with annualized ROI and comparison tables.
Type the total amount you invested or plan to invest.
Type the gain or revenue generated from the investment.
See your return on investment as a percentage and net profit.
ROI answers a deceptively simple question: what did your money make, and how fast? You enter what an investment cost and what it is worth now - or what it sold for - and the calculator returns the profit, the percentage return, and, when you give it the holding period, the annualized return. Enter several investments and it ranks them in a comparison table. The figure people most often get wrong is the annualized one: a 50% gain over three years is not roughly 17% a year. Because gains compound, it is closer to 14.5%.
A concrete input and expected output from the current implementation.
Input
Initial cost: $10,000 | Final value: $15,000 | Holding period: 3 years
Expected output
Profit: $5,000 | Simple ROI: 50% | Annualized ROI: 14.5% per year
The gain is 15,000 - 10,000 = 5,000, which is 50% of the 10,000 invested. Re-expressed per year, 1.5^(1/3) - 1 = 0.1447, so the value grew about 14.5% compounded annually - not 50 / 3 = 16.7%, which ignores compounding.
You supply the money put in and the money received back. The calculator subtracts the cost from the final value to get the profit, then divides by the cost to get the return as a percentage: (15,000 - 10,000) / 10,000 = 50%. Every other figure on the page is derived from this pair, so the result is only as complete as the two numbers you enter.
With a holding period, the calculator converts the total return into a per-year rate by compounding backward: (final / cost)^(1/years) - 1. This is a geometric mean, which is why 50% over three years reads as 14.5% a year, not 16.7%. Simple division overstates the annual figure because it ignores the compounding the investment would need to earn on its earlier gains.
Because returns compound. A 16.7% gain in year one leaves $11,670, so 16.7% in year two is a bigger dollar gain than in year one. The annualized rate is the single rate that, compounding each year, produces the observed end value - about 14.5% in this case, not 16.7%. The gap grows with the holding period and the size of the return.
No. The calculator works only from the two numbers you enter, and inflation never enters the calculation. To get a real picture, fold every cost - commissions, taxes, repairs, holding costs - into the initial cost, and remember that a 10% nominal return during 3% inflation is roughly a 7% gain in purchasing power.
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