INVESTING
ROI, short for return on investment, tells you how much an investment earned compared with what it cost. This calculator shows the total return and the yearly (annualised) return, so investments held for different lengths of time can be compared fairly. Enter what you put in, what it is worth now and how long you held it, then press Calculate.
ROI calculator
Results are estimates for educational purposes only. They are based on the numbers you enter and are not financial advice.
Say you put $10,000 into an investment and six years later it is worth $18,000.
The gain is $8,000.00, and the total ROI is 80.00%. That sounds strong, but the total on its own hides the time it took. The annualized return (CAGR) works out at 10.29% a year, which is the yearly rate that, compounded for six years, turns $10,000 into $18,000.
Now imagine the same 80% total return took 20 years instead of six. The annualized return would be only 2.98% a year, worse than a typical savings account over a good stretch. Same headline ROI, completely different performance. This is why the annualized figure is the one to compare when you judge investments held for different lengths of time.
Investor.gov, the U.S. Securities and Exchange Commission’s education site, offers free investing guides and tools.
Total ROI is a simple measure: it compares the gain or loss with what the investment cost, but it ignores time completely. An 80% return looks exactly the same whether it took 2 years or 20 years to earn, until you annualise it, and only then can you see how hard the money actually worked in each year.
CAGR, the compound annual growth rate, smooths the whole period into one steady yearly rate. It is the single yearly return which, compounded each year, would take you from the starting amount to the final amount, and it is the honest way to compare investments of different ages, because it puts a two-year holding and a twenty-year holding on the same yearly footing.
ROI on its own says nothing about risk. A high ROI that risked everything is not the same quality as a steady return earned with far less danger of loss, so always read an ROI figure alongside how safe the investment was, how easily you could have sold it, and what could have gone wrong along the way.
ROI is the gain or loss on an investment as a percentage of what it cost. For example, if you put in $10,000 and it grew to $18,000, the gain is $8,000 and the ROI is 80%.
It depends on the risk and the period. Long-run stock market returns of roughly 7 to 10% a year are a common yardstick, so judge any annualised return against that, and against the risk that was taken to earn it.
ROI is the total return over the whole period. CAGR is that same growth expressed as one steady yearly rate, which makes investments held for different lengths of time easier to compare fairly.
Only if you build them into the numbers you enter. Enter the final value after costs, and include fees in the amount you put in, for an honest figure.