ROI Calculator

ROI (Return on Investment) is a financial performance metric that measures how much profit or loss an investment has generated relative to its cost. It is expressed as a percentage and is one of the most widely used metrics across all forms of investing, from stocks and real estate to crypto and business ventures.

The formula is simple: ROI = (Net Profit / Cost of Investment) × 100. If you invested $10,000 in Bitcoin and sold for $15,000, your ROI is ($5,000 / $10,000) × 100 = 50%. ROI gives you a quick, standardized way to compare the profitability of different investments regardless of their size.

The basic ROI formula is: ROI = ((Final Value - Initial Investment - Fees) / Initial Investment) × 100. Each component matters:

Initial Investment: The total amount you put in, including purchase price and any upfront costs.

Final Value: What your investment is worth at the end, whether you sell or simply mark-to-market.

Fees: Trading fees, gas fees, commissions, and any other costs incurred during the investment. These directly reduce your net return and are often overlooked by beginners.

ROI tells you the total percentage return but ignores how long it took. A 100% ROI over 1 year is very different from 100% over 10 years. This is where CAGR (Compound Annual Growth Rate) becomes useful.

CAGR annualizes the return, showing the equivalent yearly growth rate assuming steady compounding. If your $10,000 grew to $20,000 over 5 years, the ROI is 100% but the CAGR is only 14.87%. CAGR gives a more honest picture for comparing investments held over different time periods.

Use ROI for quick comparisons of similar-duration investments. Use CAGR when comparing investments across different time horizons. Our annualized ROI metric in this calculator is equivalent to CAGR.

Annualized ROI converts your total return into an equivalent yearly rate, making it possible to compare investments held for different periods. The formula is: Annualized ROI = (Final / Initial)^(1/Years) - 1.

For example, an investment that returned 200% over 4 years has an annualized ROI of (3)^(0.25) - 1 = 31.6% per year. This is significantly more useful than saying "200% ROI" because it lets you compare directly against the S&P 500's ~10.5% annual return or a savings account's 4.5% rate.

1. Ignores time: Simple ROI does not account for how long the investment was held. A 50% return in 1 month is far superior to 50% over 10 years, but both show the same ROI. Always consider annualized ROI for a fair comparison.

2. Ignores risk: ROI measures return without considering the risk taken. A 20% ROI from a government bond and 20% from a meme coin are not equivalent because the meme coin carried far greater risk of total loss.

3. Ignores cash flows: ROI assumes a single investment and exit. If you dollar-cost averaged or took partial profits along the way, simple ROI becomes inaccurate. For complex cash flow scenarios, consider using IRR (Internal Rate of Return).

4. Survivorship bias: When evaluating ROI on past investments, we naturally focus on winners. The true ROI of a strategy must include all investments, including total losses.