Return on Investment (ROI) is the ratio of net gain to the initial investment, expressed as a percentage. ROI = (Net Gain / Initial Investment) × 100. A 50% ROI means you gained 50 cents for every dollar invested.

It depends on the investment type and risk. Stock market average is ~10%/year. Real estate often targets 8–12% annually. Business projects may target 15–30%+ ROI. Savings accounts currently yield 4–5%. Higher ROI expectations should reflect higher risk.

Yes — negative ROI means you lost money. A -20% ROI means you lost $0.20 for every $1 invested. When evaluating investments or projects, any ROI below your cost of capital effectively represents a bad investment even if the percentage is positive.

ROI Calculator

Calculate return on investment (ROI) for any investment or business project. Enter the initial cost and final value (or net gain) to see total ROI percentage, annualized return (CAGR), net gain in dollars, and payback period.

ROI Analysis

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Return on Investment: What It Measures and Why It Matters

ROI is one of the most widely used performance metrics in both personal investing and business decision-making. The ROI calculator computes both simple ROI and annualized (CAGR) return, giving you a complete picture of investment performance regardless of how long an investment was held.

ROI Formula

Simple ROI = (Net Gain ÷ Initial Investment) × 100. Net Gain = Final Value + Income − Initial Investment. A $10,000 investment that grows to $15,000 with $500 in dividends has a net gain of $5,500 and an ROI of 55%. Simple ROI doesn't account for the time period — which is why CAGR is often more useful for comparison.

Why Annualized Return (CAGR) Matters

CAGR allows fair comparison between investments held for different periods. A 50% ROI over 2 years is impressive; a 50% ROI over 10 years is mediocre. CAGR = (Final Value / Initial Investment)^(1/years) − 1. The 2-year 50% ROI annualizes to ~22.5%/year; the 10-year version annualizes to only 4.1%/year.

What Counts as a Good ROI?

Context matters enormously. Stock market average: ~10%/year. High-yield savings: ~4–5%. Real estate: 8–12% with leverage. Small business: 15–30%+. Marketing campaigns: 100–400% (very industry-specific). Compare ROI against your cost of capital — any ROI below that rate destroys value even if positive.

ROI Limitations

ROI doesn't account for risk — a 10% return on Treasury bonds and a 10% return on penny stocks are very different propositions. It also ignores opportunity cost (what you gave up), doesn't account for inflation, and can be manipulated by defining "investment" narrowly. Use ROI alongside other metrics like NPV, IRR, and risk-adjusted return for complete analysis.

Frequently Asked Questions

What is ROI?

Return on Investment = (Net Gain / Initial Investment) × 100. A 50% ROI means $0.50 gained for every $1 invested. It's the most basic measure of investment efficiency.

What is a good ROI?

Depends on investment type and risk. Stock market average ~10%/year. Savings accounts ~4–5%. Real estate 8–12%. Business projects 15–30%+. Compare against your cost of capital — positive ROI below that rate destroys value.

What is the difference between ROI and CAGR?

ROI is total return over the holding period regardless of time. CAGR annualizes to show the equivalent per-year rate. CAGR enables fair comparison between investments held for different durations.

How do I calculate ROI for a business?

ROI = (Net Profit / Total Investment Cost) × 100. Include all costs in the denominator. Net profit = incremental revenue minus all incremental costs attributable to the investment.

Can ROI be negative?

Yes — negative ROI means you lost money. -20% ROI means you lost $0.20 per dollar invested. Any ROI below your cost of capital is effectively a bad investment even if the percentage is positive.