Return on Investment (ROI) Calculator
Return on investment (ROI) tells you how much an investment has yielded relative to what you put in. Enter a time period to also see the annualised return (CAGR) โ essential for fairly comparing investments of different lengths.
Result
+50%
Total return
- Profit or loss
- ยฃ2,500.00
- Annualised return (CAGR)
- +14.47%
How this was calculated
- 1Calculate the profit or lossยฃ7,500.00 โ ยฃ5,000.00 = ยฃ2,500.00
- 2Divide by the amount investedยฃ2,500.00 รท ยฃ5,000.00 = 50%
- 3Convert to an annual percentage over the chosen period(ยฃ7,500.00 รท ยฃ5,000.00)^(1รท3) โ 1 = 14.47%
Formula
ROI = (final value โ initial) รท initial ร 100%
Total return says nothing about how long it took. A 50% return in 1 year is very different from 50% over 10 years. CAGR solves this by spreading the return evenly across years: (final รท initial)^(1 รท years) โ 1.
What the variables mean
- ROI
- Total return over the whole period
- CAGR
- Compound annual growth rate
Worked examples
โฌ 5,000 invested, now worth โฌ 7,500, after 3 years
โ Total return +50%, CAGR โ +14.5% per year.
Common mistakes
- Comparing two investments on total return without accounting for the time period.
- Not accounting for fees and tax on the profit, which lowers the real return.
Important to know
- Past performance is no guarantee of future results. This is an arithmetic look back, not a forecast.
When to use it
- Evaluating the return on a stock portfolio or property investment.
- Fairly comparing different investments with unequal time periods via CAGR.
Frequently asked questions
What counts as a good return?
That depends on the risk taken. Stock markets have historically returned an average of 6โ8% per year over long periods, with significant year-to-year swings.
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