How to Calculate ROI
Return on Investment (ROI) measures how much profit you made relative to what you spent. It's one of the most widely used metrics in investing and business because it's simple, comparable, and works across any asset class.
The basic formula: ROI = ((Final Value − Initial Investment) ÷ Initial Investment) × 100. A 50% ROI means you made 50 cents for every dollar invested. A negative ROI means a loss.
For comparing investments held over different periods, use the annualized return (also called CAGR): it converts your total return into a consistent yearly rate, making apples-to-apples comparison possible.
Frequently Asked Questions
What is a good ROI?
A 'good' ROI depends on the investment type and timeframe. For stock market investments, 7–10% annually is considered solid. Real estate typically targets 8–12%. For business investments, 15–25%+ is common. Always compare ROI against your opportunity cost — what you'd earn in a risk-free alternative like a savings account or bonds.
What is the difference between ROI and annualized return?
Total ROI is the overall percentage gain from start to finish, regardless of time. Annualized return breaks that down into a consistent annual rate, making it easier to compare investments held for different periods. A 50% total ROI over 5 years is very different from 50% over 1 year.
Does ROI account for inflation?
Standard ROI is a nominal figure — it doesn't adjust for inflation. To get real (inflation-adjusted) ROI, subtract the inflation rate from your annualized return. Use our Inflation Calculator to see the purchasing power impact.
What is a "multiple on money" (MoM)?
Multiple on money shows how many times your original investment grew. A 2× MoM means you doubled your money; 3× means you tripled it. It's common in private equity and venture capital. A 2× MoM over 5 years is equivalent to roughly 15% annualized return.