Question 1

What is ROI?

Accepted Answer

Return on investment (ROI) measures the gain or loss on an investment relative to its cost, expressed as a percentage. A positive ROI means the investment returned more than you put in; a negative ROI means it returned less.

Question 2

What is the ROI formula?

Accepted Answer

Net Profit = Amount Returned − Amount Invested, and ROI% = Net Profit ÷ Amount Invested × 100. For example, investing 100,000 and getting back 150,000 gives a net profit of 50,000 and an ROI of 50%.

Question 3

What is the difference between total and annualized ROI?

Accepted Answer

Total ROI is the overall percentage return across the whole holding period, ignoring how long it took. Annualized ROI converts that into an equivalent yearly rate using ((Returned ÷ Invested)^(1/years) − 1) × 100, which makes investments of different durations comparable.

Question 4

What costs and gains should I include?

Accepted Answer

For a meaningful result, the amount invested should include all costs — purchase price, fees and any ongoing expenses — and the amount returned should include the final value plus any income received, such as dividends or interest. Being consistent about what you include keeps the ROI comparable.

Question 5

What are the limitations of ROI?

Accepted Answer

Plain ROI ignores how long the money was invested and says nothing about risk. Two investments with the same ROI can be very different if one took one year and the other took ten, or if one was far riskier. Use annualized ROI to account for time, and consider risk separately.

Question 6

Are these figures guaranteed or an estimate?

Accepted Answer

The result is an estimate based on the figures you enter and does not account for taxes, inflation or reinvestment timing. Treat the output as a planning estimate rather than a guaranteed outcome.

ROI Calculator

ROI Calculator

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What is ROI?

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