Return on Investment (ROI) is one of the most widely used metrics for evaluating whether an investment, project, or purchase paid off. This calculator finds ROI as a percentage from an initial cost and a final value.
The formula
For a $1,000 investment that grows to $1,250: gain = $250, and ROI = 250 ÷ 1,000 × 100 = 25%.
Worked examples
| Initial investment | Final value | ROI |
|---|---|---|
| $5,000 | $6,500 | +30% |
| $2,000 | $1,700 | −15% |
| $10,000 | $10,000 | 0% |
What ROI does and doesn't capture
ROI is a simple, easy-to-communicate percentage, but it doesn't account for the time period over which the return occurred. A 25% ROI over one year is very different from a 25% ROI over ten years — for comparing investments with different timeframes, an annualized return figure is more appropriate than raw ROI.
Common mistakes
- Comparing ROI across different time periods without annualizing. A higher ROI over a much longer period may actually represent a worse annual return than a lower ROI over a short period.
- Ignoring fees and costs. Transaction costs, fees, and taxes should be included in the initial investment or subtracted from the final value for an accurate ROI.
Frequently asked questions
How do I calculate ROI?
Subtract the initial investment from the final value to get the gain, then divide the gain by the initial investment and multiply by 100.
Can ROI be negative?
Yes. A negative ROI means the final value is lower than the initial investment, representing a loss.
Does ROI account for how long the investment was held?
No. Raw ROI doesn't factor in time — an annualized return calculation is more appropriate when comparing investments held for different lengths of time.