Quick Answer: Calculate simple ROI, annualized ROI, investment gain or loss, and return multiple from the amount invested, amount returned, and holding period.
How This Calculator Works
ROI compares an investment's net gain with the original amount invested. Annualized ROI converts that total return into an average yearly growth rate so investments with different holding periods are easier to compare.
Worked Scenario: Scenario: Comparing Two Investment Outcomes
An investor puts 10,000 into a project and receives 12,000 back after one year.
Scenario Inputs
- Amount invested: $10,000
- Amount returned: $12,000
- Investment length: 1 year
Outcome: The investment gain is $2,000. ROI is 20%, and because the holding period is one year, the annualized ROI is also 20%.
Formula and Methodology
Investment gain = Amount returned - Amount invested
ROI% = Investment gain / Amount invested * 100
Annualized ROI% = ((Amount returned / Amount invested)^(1 / years) - 1) * 100
Return multiple = Amount returned / Amount invested
Variables
- Amount invested: The initial cash, basis, or capital committed to the investment
- Amount returned: The ending value, proceeds, or total cash recovered from the investment
- Years: The holding period used for annualized ROI
Assumptions
- Amounts are entered in the selected display currency and are not adjusted for inflation.
- Amount returned should include the final sale value and any distributions if those should count toward the investment outcome.
- Annualized ROI assumes the total return compounds smoothly over the entered holding period.
Limitations
- ROI does not account for taxes, fees, liquidity constraints, reinvestment timing, or risk.
- Annualized ROI can be misleading for volatile assets because it summarizes an uneven path as one average yearly rate.
- If the amount invested is zero, ROI is undefined and the calculator returns 0 for percentage outputs.
Practical FAQs
What is ROI?
ROI, or return on investment, is the investment gain divided by the amount invested. It shows profit or loss as a percentage of the original investment.
What is annualized ROI?
Annualized ROI converts the total ROI over a holding period into an average yearly return. This makes a six-month investment and a five-year investment easier to compare.
Should fees and taxes be included?
For a net ROI, include fees and taxes in the cash flows. For a gross ROI, leave them out. Use one method consistently when comparing investments.