ROI Calculator — return on investment, and its blind spot

How it works

One division: ROI = (V − C) ÷ C, the published formula, with the net gain V − C shown in dollars beside it. Losses come out negative, bounded at −100% when the value reaches zero. The annualized output repairs ROI's known weakness: it asks what constant yearly rate would turn C into V over the holding period — (V/C)^(1/y) − 1 — so a 400% ROI reads as 400% a year if it took one year and about 38% a year if it took five. The outcome sweep places your result on a fixed scale from a halving to a five-fold return, losses included.

Worked example

The anchors are the published resolved cases, both rendering on this page: Investment A — the default — costs $100 and is worth $500, so ($500 − $100) ÷ $100 = 400%; Investment B — the preset — ends at $400, giving ($400 − $100) ÷ $100 = 300% (CFI's worked comparison). The annualized column is this calculator's addition: at one year the figures match, and stretched over five years the 400% becomes about 38% a year — same ROI, very different investment.

Frequently asked questions

What is ROI and how is it calculated?

The gain relative to cost: (value − cost) ÷ cost, as a percentage. It is the quickest like-for-like comparison of investments of different sizes — a $400 gain on $100 (400%) beats a $400 gain on $1,000 (40%) — and the published example pair on this page is exactly that comparison.

What is ROI's biggest limitation?

Time-blindness: ROI says nothing about how long the money was at work. A 100% return in a year is exceptional; the same 100% over twenty years is under 4% annualized. Any ROI comparison across different holding periods should use the annualized output — or the CAGR calculator, which is that computation by name.

Can ROI be negative?

Yes — any value below cost gives a negative ROI, down to −100% at a total loss. The loss preset shows a 15% decline; the sweep's first row shows a halving. Percentages below −100% are impossible without leverage, which this page does not model.

What counts as the cost?

Everything paid to acquire and hold: purchase price plus fees, commissions, and improvements — and for honest figures, the value side should be net of selling costs. The formula is indifferent to what you include; the comparison is only as good as both sides being counted the same way.

How is ROI different from CAGR?

CAGR is annualized ROI under another name: the constant yearly growth rate connecting start to end over the years held. ROI answers "how much, total"; CAGR answers "how fast, per year" — this page shows both, and the CAGR calculator leads with the time-aware one.

Does ROI account for dividends or income along the way?

Only if you add them to the value side: total-return ROI counts sale value plus everything collected. Leaving income out understates the true return — include dividends, rent, or interest received in the current-value figure for the honest number.

How accurate is this, and what does it exclude?

The division is exact for the two numbers you enter; the judgment is what they include. It excludes taxes, inflation (a 20-year ROI is in cheaper dollars), cash flows at different times (IRR territory), and risk — two equal ROIs are not equal investments if one risked ruin.