ROI Calculator 📊

A real example: turning $5,000 into $8,000

Say you invest $5,000 and sell three years later for $8,000. Your total ROI is:

($8,000 − $5,000) ÷ $5,000 = 60%

But that's spread over three years. The annualized return — the rate that matters for comparing investments — is about 17% per year. A 60% total return over 3 years is very different from 60% in a single year, which is why annualizing lets you compare deals of different lengths fairly. Enter your amounts and time frame above.

ROI vs annualized return — what's the difference?

Total ROI is the overall percentage gain: (final − initial) ÷ initial. It's simple, but it ignores time — a 50% return is very different over 1 year vs 10.

Annualized return (CAGR) fixes that by showing the smooth yearly rate that would turn your starting amount into the final value. It's the fairest way to compare investments held for different lengths of time.

The same ROI can be a great or a poor investment

Here is the calculator's default, $10,000 growing to $18,000 for an 80% total return, earned over four different lengths of time, alongside the classic "I doubled my money":

Stretch the same 80% from two years to twenty and the yearly return falls from 34.16% to 2.98%. Doubling your money sounds impressive, but over 20 years it works out to 3.53% a year. Whenever someone quotes a total return, the first question is always "over how long?"

Comparing two investments: total ROI picks the wrong winner

Total ROI is especially misleading when you rank investments held for different lengths of time. These four are illustrative, but the pattern is general:

Ranked by total ROI, D wins. Ranked by what each one earned per year, it comes third, and the modest 20% gain comes first. That is why the calculator shows both numbers. Use the annualized figure when comparing, and compare investments with similar risk: a 20% year from a single volatile stock and a 7% year from a broad index fund are not the same achievement.

Putting it in context

A "good" annualized return depends on the risk. Broad stock markets have historically averaged roughly 7–10% per year over the long run. If your number is far above that, make sure you understand the risk you took; if it's below, compare against simply investing in low-cost index funds — see the compound interest calculator.

When ROI can mislead you

• It assumes one lump sum. If you added money or took some out along the way, a simple start-to-finish ROI overstates or understates your return. For regular contributions, use the compound interest calculator instead.
• Fees and taxes. Enter what you actually walked away with. If $10,000 became $18,000 over 5 years but $1,000 went on fees and taxes, your net is $17,000: 11.20% a year, not 12.47%.
• Income received along the way. Dividends, interest or rent paid out to you aren't in the final value unless you add them in. Leave them out and you understate the return.
• Inflation. The calculator shows a nominal return. With illustrative 3% inflation, a 12.47% nominal return is about 9.19% in real terms. The inflation calculator shows how much buying power the gain actually kept.
• Very short periods. Annualizing a short gain magnifies it. A 10% gain in six months annualizes to 21%, which assumes you could repeat it, and a lucky few months usually can't be.
• Borrowed money. With a mortgage or margin loan, ROI on the cash you put in can look far higher than the return on the asset itself, and losses are magnified the same way.

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Frequently asked questions