How to use the ROI calculator
- Enter what you paid for the investment.
- Enter its final value: the sale price, or today’s value if you still hold it.
- Add any costs, such as broker commissions, closing costs or advisory fees, and any income it paid you along the way.
- Give the holding period as a length or as start and end dates.
- Read the total ROI, the annualized ROI and the net gain. The result changes as you type.
How ROI and annualized ROI are calculated
Simple ROI tells you the size of the gain. Annualized ROI, also called the compound annual growth rate (CAGR), tells you how fast it happened. When you enter dates, the calculator counts the actual days between them and divides by 365.25.
Worked example
You buy shares for $12,000 and pay $150 in commissions, so the total cost is $12,150. Four years later you sell for $18,500, and you collected $640 of dividends while you held them. You got back $19,140.
The net gain is $6,990.00, and ROI is $6,990 ÷ $12,150 = 57.53%. Spread over four years, that is (1.5753)1/4 − 1 = 12.03% a year.
Why the time period changes the verdict
Two investments: one gains 50% in 3 years, the other 80% in 6 years. The second has the bigger total ROI, but the first grew faster, at 14.47% a year against 10.29%. Only the annualized figure lets you compare them, or compare either with a savings account rate.
Short periods work the other way. A 10% gain in three months annualizes to 46.41%, a pace that rarely lasts. The calculator warns you whenever the holding period is under a year.
ROI is not the same as profit margin
ROI compares profit with the money you put in. Profit margin compares profit with the money you took in. Buying stock for $100 and selling it for $125 is a 25% ROI but a 20% margin, because $25 is a quarter of the cost and a fifth of the sale price. Mixing the two up is common in business plans, so label which one you mean.
Key features
- Includes fees and income, not just buy and sell prices.
- Annualized ROI for any period, entered as a length or as dates.
- Money multiple, the total returned for every unit invested.
- Handles losses correctly, including annualized negative returns.
Practical use cases
Rental property. Use the full purchase cost including closing costs as the amount invested, total rent minus expenses as income, and the sale price as the final value.
Marketing spend. Treat campaign cost as the investment and the gross profit it produced as the final value to see whether a channel paid off. Leave the period at one year for a like-for-like comparison.
Tax. These are pre-tax returns. In the US, gains on assets held longer than a year usually qualify for lower long-term capital gains rates. In the UK, gains inside an ISA are tax-free, while gains outside it may be subject to Capital Gains Tax above the annual exempt amount.