ROI Calculator


Want to evaluate the performance of your investment? Use this ROI calculator to see how much your investment earned (or lost).

ROI Calculator

ROI is a simple, helpful metric to assess how profitable an investment is.

So how do you calculate ROI?

With this calculator, you'll know:

  • The ROI of your investment
  • The annualized ROI of the investment
  • The total loss or profit your investment generated

Find out how ROI is calculated, the pros and cons of using ROI, and tips for making smart investments in this guide.

How do you calculate ROI?

To calculate ROI, follow the steps below.

  1. Enter the initial investment amount.

  2. Then, enter the final value of the investment, or how much you estimate the final value will be.

  3. Add the number of months between the initial investment and the final value.

  4. Finally, hit "Calculate" to see your ROI.

The calculator will show you the ROI of your investment, plus the total amount gained or lost, and your annualized ROI.

What is annualized ROI? Annualized ROI is the return of an investment on an annual basis. This is different from the overall ROI, which calculates investment performance over the entire investment period.

What is ROI?

ROI, or Return on Investment, is a metric people use to evaluate the efficiency of an investment. It compares the returns earned to the initial cost of the investment.

If an investment has a high ROI, it typically means it earned enough to make the initial investment worth it. If an investment has a low ROI, the initial cost may outweigh any returns earned.

ROI can be used to calculate returns already earned, or it can be used to predict the returns your investment will earn.

How to calculate ROI manually
To calculate ROI by hand, follow these steps:
  1. First, find the profit of your investment by subtracting the initial cost from its current value.
  2. Then, divide the profit amount by the initial cost of the investment.
  3. That is your ROI.

What is a good ROI?

There's no single number that's considered a good ROI. In fact, a good ROI will depend on many other factors than just the returns and the initial investment cost.

These factors may include the investor's risk tolerance, their investment timeline, the specific industry or type of investment, and more.

A low ROI to one investor could be considered a high ROI to another.

Pros and Cons of ROI

ROI can be a helpful metric, but it shouldn't be the only number you look at. Here are some pros and cons to keep in mind when using ROI to assess your investment.

Pros

  • Easy to calculate
  • Easy to understand
  • Can help you decide if an investment is worth it
  • An easy way to compare investments

Cons

  • Doesn't typically consider holding period
  • Doesn't take risk into account
  • Doesn't take inflation into account
  • Can be inflated if all costs aren't considered
  • Only calculates financial gains, not any other benefit

As you can see, while ROI is a simple, handy metric, there are better ways to evaluate your investments. Find a few smart ideas for getting the most out of your investments with the tips below.

Tips for Making Smart Investments

Calculating the ROI can be helpful in evaluating whether your investments are worth the cost and time. Here are a few other ways to keep tabs on your investments:

  • Make sure your finances are stable, first. That means having a healthy emergency fund, paying down any high-interest debt, and having a solid retirement plan in place.

    If you have a lot of high-interest debt, a personal loan may be a decent option to pay it down before diving into investing. Just make sure you can secure an affordable rate (less than 10%, ideally 7% or lower.)

  • Use a portfolio analyzer. Portfolio analyzers give you in-depth information and tools about all your investments, including your returns over time. Portfolio management software is another good tool for monitoring performance (and many are free).

  • Use other metrics to measure your investments. Try calculating net present value to see the value of a potential investment or a standard investment calculator to estimate potential growth.

  • Consider outside advice or opinions. Ultimately, you'll know what investments are best for you. But, hearing thoughts from other voices in the investing world can be a good way to expand your point of view.

    Just remember to take everything you read or hear with a grain of salt! One person's situation will likely be wildly different than your own.

Bottom Line

Whatever you might be investing in, calculating ROI is a helpful, easy way to evaluate performance. Just remember that it's not the end-all-be-all of investing metrics. There are many more factors to consider.

When calculating ROI, keep in mind that what's considered "good" or "bad" will depend on many things, like your risk tolerance, timeline, the type of investment, and much more. Do as much research as you can to get the full picture of whether the investment is worth it.

Holly Zorbas is a assistant editor at CreditDonkey, a personal finance comparison and reviews website. Write to Holly Zorbas at holly.zorbas@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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