How to calculate investment ROI: formula, examples, and calculator
Learn to calculate return on investment (ROI): step-by-step formula, real examples with stocks, real estate and business, and free calculator.
What is ROI and why it matters
ROI (Return on Investment) is the most fundamental financial metric for evaluating profitability. As a percentage, it tells you how much you gained (or lost) relative to your investment.
Basic formula: ROI = ((Gain - Investment) / Investment) × 100. Invested $1,000, now worth $1,300 = 30% ROI. According to Morningstar (2025), only 23% of individual investors regularly calculate ROI, yet those who do earn 2.4% more annually.
Calculate instantly with our free ROI calculator.
ROI formula with real examples
Stocks: Bought 100 Apple shares at $150 ($15,000), now worth $18,000 + $400 dividends. ROI = 22.67%.
Real estate: $100K apartment ($20K down), $7,200 net rent + $5,000 appreciation. ROI on equity = 61%.
Online business: $2,000 marketing, $8,500 sales, $3,000 costs. ROI = 175%.
Try your scenarios with the ROI calculator.
ROI vs other performance metrics
| Metric | Measures | When to use |
|---|---|---|
| ROI | Total return vs investment | Compare different investments |
| CAGR | Compound annual growth | Long-term investments |
| IRR | Internal rate of return | Variable cash flows |
| ROE | Return on equity | Evaluate companies |
| Cap Rate | Real estate yield | Compare properties |
Combine with compound interest calculator.
Annualized ROI: comparing investments of different durations
50% in 5 years (8.45% annualized) is NOT better than 30% in 2 years (14.02% annualized). Formula: Annualized ROI = ((1 + ROI)^(1/years) - 1) × 100. Always compare using annualized ROI.
The ROI calculator does this automatically.
Real vs nominal ROI: inflation impact
10% ROI with 4% inflation = ~5.8% real ROI. Formula: Real ROI = ((1 + Nominal) / (1 + Inflation) - 1) × 100. Examples: US (2.8% inflation): 10% nominal → 7.0% real. Argentina (45%): 50% nominal → 3.4% real.
Percentage calculator for inflation impact.
Common ROI calculation mistakes
Forgetting hidden costs (commissions, taxes, maintenance), ignoring opportunity cost, ignoring time factor, not adjusting for inflation, mixing currencies.
How to improve your investment ROI
Reduce costs (0.03% index funds vs 1-2% active), reinvest dividends (+40-60% over 20 years), diversify (max 5-10% per asset), use tax advantages (401k, IRA).
Compound interest calculator to project growth.
Free ROI tools
Try this tool:
Open tool→Frequently asked questions
What is a good ROI?
Context-dependent. Stocks (S&P 500): ~10% annual average. Real estate: 8-12%. Business: 15-25%. Any investment should beat inflation + bank deposit rates.
How to calculate ROI with dividends?
Include dividends: ROI = ((Final value + Dividends - Initial investment) / Initial investment) × 100.
Does ROI include taxes?
Basic ROI is pre-tax. For accuracy, calculate net ROI after capital gains taxes. Long-term gains (1+ year) often have lower tax rates.
How to calculate real estate ROI?
Include: rent income + appreciation - expenses (maintenance, taxes, insurance, vacancies). Divide by your actual investment (down payment + closing costs), not total property price.
What's the difference between ROI and CAGR?
ROI measures total return regardless of time. CAGR expresses return as compound annual rate, allowing fair comparison of different-duration investments.
Does negative ROI mean I lost money?
Yes, negative ROI means your investment is worth less than what you paid. If you haven't sold, the loss is 'on paper' (unrealized) and may recover over time.