ROI Calculator — Return on Investment & Annualized CAGR

Return on Investment (ROI) is a financial metric used to evaluate the profitability of an investment. It calculates the net profit or loss as a percentage of the total starting cost of the investment, making it easy to compare the efficiency of different capital allocations.

Simple ROI shows the absolute percentage gain or loss over the entire holding period of an investment, regardless of duration. Annualized ROI (Compound Annual Growth Rate, or CAGR) measures the average annual return. Annualized ROI is essential when comparing investments with different holding periods (for example, a 50% gain over 10 years vs. a 20% gain over 2 years).

Dividends and interest payments earned during the investment increase your total return. Transaction fees, brokerage commissions, and advisory expenses increase your capital outlay (cost basis). Factoring both values in gives you a true 'net' ROI instead of an inflated 'gross' ROI.

A negative ROI indicates a net loss on your investment, meaning the final value plus any income earned was less than the sum of your initial investment, contributions, and fees. For instance, if you invest $1,000 and exit with $900, your net loss is $100, resulting in a -10% ROI.

A good return depends on risk tolerance, market conditions, and asset class. Historically, the U.S. stock market (represented by the S&P 500 index) has averaged an annual return of about 10% before inflation. Real estate yields often average 6% to 8%, while lower-risk instruments like government bonds or high-yield savings yield 3% to 5%.