What is Return on Investment (ROI)?

Return on Investment (ROI) is a key performance metric used to evaluate the profitability of an investment. It measures the gain or loss from an investment relative to the amount invested, expressed as a percentage. A higher ROI means a more profitable investment.

How to Use This Calculator

Enter your initial investment amount
Input the current or final value of your investment
Add any additional investments made during the period (optional)
Set the investment period in years and months
Click "Calculate" to see your ROI and annualized returns

Understanding Your Results

ROI (Return on Investment): The total percentage return over the entire investment period
Annualized ROI: The average yearly return, also known as CAGR (Compound Annual Growth Rate)
Net Profit: The actual dollar amount gained or lost
Total Investment: Your initial investment plus any additional contributions

ROI Formula

The basic ROI formula is: ROI = (Final Value - Total Investment) / Total Investment × 100

For annualized returns, we use the CAGR formula: CAGR = (Final Value / Total Investment)^(1/years) - 1

Why Annualized ROI Matters

While total ROI shows your overall return, annualized ROI allows you to compare investments held for different time periods. For example, a 50% return over 5 years (annualized: 8.4%) is less impressive than a 30% return over 1 year (annualized: 30%). Use annualized ROI to make fair comparisons between different investment opportunities.

Investment Tips

Remember that past performance doesn't guarantee future results. Consider risk alongside returns - higher returns often come with higher risk. Diversify your portfolio across different asset classes to balance risk and reward. Track your investments regularly and adjust your strategy based on your financial goals and risk tolerance.