Return on investment (ROI) expresses how much you gained or lost relative to what you invested. Investors use ROI to compare stocks, real estate, business projects, and private equity on a common percentage basis. When holding periods differ, annualized ROI converts total return into a compound yearly rate for apples-to-apples comparison.
For marketing campaign profitability from ad spend and attributed revenue, use the marketing ROI calculator. For multi-year compound growth benchmarks, compare with the CAGR calculator.
Annualized ROI (%)=[(Initial InvestmentFinal Value)1/n−1]×100
Net profit equals final value minus initial investment. Annualized ROI uses geometric compounding and requires a positive final value, positive initial investment, and a holding period greater than zero years.
Worked example
You invest $10,000 and sell for $15,000 after 3 years. Net profit = $5,000. ROI = ($5,000 ÷ $10,000) × 100 = 50%. Annualized ROI = (($15,000 ÷ $10,000)^(1/3) − 1) × 100 ≈ 14.47%.
Frequently asked questions
What is a good ROI?
Acceptable ROI depends on risk, liquidity, and opportunity cost. Public equity markets have historically returned roughly 7% to 10% annualized over long periods, but individual investments vary widely. Compare ROI to your required rate of return and alternative uses of capital.
When should I use annualized ROI?
Use annualized ROI when comparing investments held for different lengths of time. A 50% total return over 3 years is not equivalent to 50% over 1 year. Annualizing converts both to a yearly compound rate.
Does ROI include dividends or income?
This calculator uses a single final value input. If your investment paid dividends or interest, include those cash flows in the final value (or use a holding-period return calculator that separates capital gains and income).
How is ROI different from marketing ROI?
General investment ROI compares ending value to starting capital. Marketing ROI compares campaign revenue or profit to ad spend over a short attribution window. Both use similar percentage math but serve different decision contexts.
Resources and references
The formulas and methods in this calculator were checked against these independent sources.