Return on investment is the simplest test of whether an investment paid off. Enter the amount invested, ending value and any income received to see total ROI and the annualized return for a fair comparison across holding periods.
How it works
Calculate the return on an investment, including any income received, and annualize it for comparison across holding periods.
ROI = (Ending value + Income − Investment) ÷ Investment
Annualized return = (1 + ROI)^(1/years) − 1Common uses
- Investment and asset performance
- Marketing and technology project returns
- Comparing opportunities with different time horizons
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Amount invested | $50,000 |
| Ending value | $68,500 |
| Income received (dividends, cash flows) | $2,400 |
| Holding period | 3 years |
| Return on investment | 41.8% |
| Annualized return | 12.35% |
| Net gain | $20,900 |
| Total value returned | $70,900 |
Interpreting the results
- Always compare investments on annualized return; a 30% ROI over five years is only about 5.4% a year.
- ROI ignores the timing of interim cash flows; use the NPV & IRR calculator for multi-period projects.
Frequently asked questions
What is the difference between ROI and annualized ROI?
Total ROI measures the cumulative gain over the full holding period. Annualized ROI converts it into a compound yearly rate, which is the only fair way to compare investments held for different lengths of time.
Does ROI account for the timing of cash flows?
No. Simple ROI ignores when cash is received during the holding period. For investments with multiple cash flows at different dates, use IRR or NPV instead.
What should be included in the amount invested?
Include every cost required to acquire and hold the investment, such as purchase price, fees, commissions and implementation costs. Understating the investment overstates ROI.
Related calculators
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- CAGR & Growth Rate Calculator: Compound annual growth, total growth and year-over-year changes.
- Compound Interest & Savings Goal: Future value with monthly contributions and the deposit needed to hit a goal.
- Inflation & Real Return Calculator: Real and after-tax real return, future value and lost purchasing power.
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