What ROI tells you
Return on Investment (ROI) measures how much profit you made relative to what you put in, expressed as a percentage: (final value − initial cost) ÷ initial cost. It's a quick way to compare the profitability of different investments, purchases, or projects, regardless of their size.
ROI vs. annualized return
A raw ROI figure doesn't account for how long your money was invested — a 45% ROI over 1 year is a very different result from a 45% ROI over 10 years. The annualized return converts your total ROI into an equivalent yearly rate, making it possible to fairly compare investments held for different lengths of time.
Frequently asked questions
What's considered a good ROI?
It depends heavily on the type of investment and the risk involved — a "good" ROI for a savings account looks very different from a good ROI for a startup investment. Compare against similar alternatives and their typical returns rather than a single universal benchmark.
Does this calculation include fees or taxes?
No — this is a simple gross ROI based on the initial cost and final value you enter. For a full picture, subtract any fees, commissions, or taxes from your final value before entering it.
How is annualized return different from total ROI?
Total ROI is the overall percentage gain across the whole holding period. Annualized return spreads that gain evenly across each year, so it reflects the effective yearly growth rate — the two will only match if the holding period is exactly one year.