How is ROI calculated?

ROI is calculated by subtracting the initial cost of investment from the final value, dividing by the initial cost, and multiplying by 100. Formula: ((Final Value - Initial Cost) / Initial Cost) * 100.

What is the difference between ROI and CAGR?

ROI measures total growth over the entire period, disregarding time. CAGR (Compound Annual Growth Rate) measures the mean annual growth rate if the investment had grown at a steady rate. CAGR is better for comparing investments held for different time periods.

A 'good' ROI depends on risk and time. For the stock market (S&P 500), the historical average is about 10% annually (CAGR). For safer investments like bonds, 4-5% might be considered good. High-risk investments often target 15-20%+.

Return on Investment (ROI) Calculator

Determine the profitability of your investments. This calculator computes both the total Return on Investment (ROI) and the Compound Annual Growth Rate (CAGR), helping you compare performance across different timeframes.

Why Calculate Both?

ROI (Total Return): Tells you how much total profit you made (e.g., "I doubled my money, so 100% ROI").
CAGR (Annualized Return): Tells you the effective annual rate. Doubling your money in 2 years (41% CAGR) is much better than doubling it in 10 years (7% CAGR).

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ROI Calculator

Return on Investment + CAGR

🌍 Currency:

Total ROI

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📐 Formulas

ROI = (Gain/Cost) × 100

CAGR = (Final/Initial)^(1/n) - 1

📊 Reference

Good ROI	7%+ annual
Great ROI	10%+ annual
Excellent	15%+ annual

Understanding Investment Returns

Calculation Formulas

We use standard financial formulas to ensure accuracy:

ROI = ((Final Value - Initial Cost) / Initial Cost) × 100%

CAGR = ((Final Value / Initial Cost) ^ (1 / Years)) - 1

Real-Life Example

You invest $10,000 in a mutual fund. After 5 years, it is worth $16,000.

Profit: $6,000
ROI: ($6,000 / $10,000) × 100 = 60.0% (Total Growth)
CAGR: ($16,000 / $10,000)^(1/5) - 1 = 9.86% (Annual Growth)

Frequently Asked Questions

Return on Investment (ROI) is a simple performance measure used to evaluate the efficiency of an investment. It is calculated by taking the net profit (or loss) of the investment and dividing it by the initial cost of the investment. The result is then multiplied by 100 to express it as a percentage. The formula is: ROI = ((Final Value - Initial Cost) / Initial Cost) * 100. A positive ROI means the investment gained value, while a negative ROI indicates a loss.

ROI measures the total growth of an investment from the beginning to the end, regardless of how long it took. It does not account for the time period. CAGR (Compound Annual Growth Rate), on the other hand, measures the smoothed annual rate of growth as if the investment had grown at a steady rate each year. CAGR is widely considered superior for comparing investments held for different lengths of time because it provides a standardized "per year" growth rate, whereas total ROI can be misleading for long-term investments.

Sources & References

Investopedia: ROI Explained - Comprehensive guide to ROI.
Harvard Business Review: ROI - Understanding ROI in business contexts.