ROI Calculator
Calculate simple and annualized return on investment (ROI), net profit, capital multiples (MOIC), and holding period growth with complete precision.
Investment Parameters
Profitability Summary
Compound Growth Schedule (Annualized)
| Year | Beginning Balance | Compounded Gain | Ending Balance | Cumulative ROI |
|---|
What is Return on Investment (ROI)?
Return on Investment (ROI) is a universal financial metric used to evaluate the efficiency and profitability of an investment or compare the relative performance of multiple capital assets. By dividing net financial gain by total investment cost, ROI standardizes profitability regardless of company size or asset class.
ROI (%) = [ (Total Proceeds – Total Costs) / Total Costs ] × 100
Where: Total Proceeds = Ending Value + Dividends/Income, and Total Costs = Initial Investment + Ongoing Expenses.
2. Annualized ROI Formula (Compound Annual Growth Rate):
Annualized ROI (%) = [ (Total Proceeds / Total Costs)(1 / t) – 1 ] × 100
Where: t = Holding period in years.
Simple ROI vs. Annualized ROI: Why Time Matters
Evaluating an investment based solely on Simple ROI can be misleading because it ignores duration:
| Scenario | Initial Cost | Ending Value | Duration | Simple ROI | Annualized ROI (CAGR) |
|---|---|---|---|---|---|
| Investment A | 10,000 | 15,000 | 1 Year | +50.0% | +50.0% / year |
| Investment B | 10,000 | 15,000 | 5 Years | +50.0% | +8.45% / year |
Both investments produced an identical +50% simple return, but Investment A is dramatically superior because it freed up capital five times faster, enabling further compound reinvestment.
What is a “Good” Return on Investment?
- Broad Stock Market Index Funds (S&P 500 / Nifty 50): Historically deliver an annualized ROI of 10% to 12% over multi-decade horizons (nominal).
- Real Estate Investments: Target a cash-on-cash return of 8% to 12% when combining rental yield with property appreciation.
- Risk-Free Government Bonds / Fixed Deposits: Typically yield 6.5% to 7.5% guaranteed returns with zero capital volatility.
- Private Equity & Venture Capital: Target an annualized return of 20% to 25%+ to justify high illiquidity and failure rates.
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Frequently Asked Questions
The basic Return on Investment formula is: ROI (%) = [(Total Proceeds - Total Cost) / Total Cost] × 100. For example, if you invest 10,000 and sell for 14,000 after incurring 500 in fees, your net profit is 3,500 on a 10,500 total cost, yielding an ROI of 33.33%.
Simple ROI measures the cumulative percentage gain over the entire life of an investment, regardless of whether it took 6 months or 10 years. Annualized ROI (Compound Annual Growth Rate) accounts for the time factor, showing the exact geometric average return earned per year.
MOIC is the ratio of total cash proceeds returned relative to total initial capital invested: MOIC = Total Proceeds / Total Cost. A 2.0x MOIC means you doubled your money, while a 1.0x MOIC indicates you broke even with zero gain.
Yes. If the final value of your investment plus any income is less than your total costs, you have incurred a capital loss, resulting in a negative ROI percentage.
Financial Engineering & CAGR Precision
Calculations follow standard corporate finance accounting methodologies. Geometric annualized returns, net profit multipliers, and compound growth schedules are mathematically verified.
Disclaimer: This calculation tool is provided for educational and self-directed financial evaluation purposes only. Past performance does not guarantee future results. Market investments are subject to risk. Consult a certified financial planner or tax advisor before committing capital.