How this is calculated
ROI = (final − initial) ÷ initial × 100. Annualized = ((final ÷ initial)^(1/years) − 1) × 100
ROI is the simplest investment metric there is: profit divided by what you put in. Gain $4,000 on a $10,000 investment and your ROI is 40%. It's intuitive — and dangerously incomplete, because it says nothing about time. A 40% gain in two years is excellent; the same 40% spread over fifteen years trails a boring savings account in some eras.
That's why this calculator also gives the annualized return (CAGR) when you enter a holding period. CAGR answers: what steady yearly percentage would turn the start value into the end value over that time? It's the number that makes a rental property, an index fund and a business venture comparable on one axis.
Remember to count costs honestly. The 'amount invested' should include fees, renovation costs, commissions — everything you actually paid — and the final value should be net of selling costs. ROI on sticker prices flatters every deal.
Frequently asked questions
What's a good ROI?
Context is everything. Broad stock indexes have returned ~10% a year over the long run, so an investment promising much more usually carries much more risk. For a multi-year holding, compare the annualized figure — not the total — against that ~10% benchmark.
What's the difference between ROI and CAGR?
ROI is the total percentage gain over the whole period; CAGR spreads it into an equivalent constant yearly rate. ROI answers 'how much did I make?', CAGR answers 'how fast?'.
Should I include dividends or rent received?
Yes — add any income the investment paid out to the final value. Skipping it understates the true return, badly so for dividend stocks and rentals.
Does this account for inflation or taxes?
No. Subtract roughly 3% a year for inflation to get real returns, and remember capital gains taxes take a slice at sale. Both matter for comparing long holdings.