Measuring how well an investment paid off
Return on investment (ROI) answers a simple question: for every dollar I put in, how much did I make? It works for stocks, a property you sold, a piece of equipment, a training course or a marketing campaign. This calculator includes income received along the way and costs, then converts the result into an annualized return so you can compare investments held for different periods.
The formulas
Net profit = final value + income received − costs − amount invested
ROI = net profit ÷ amount invested × 100
Annualized return (CAGR) = (amount returned ÷ amount invested)^(1 ÷ years) − 1
CAGR (compound annual growth rate) is the steady yearly return that would have produced the same result. The money multiple shows how many times you got your stake back.
Worked example: a stock portfolio held for 3 years
You invest $10,000, receive $600 in dividends, pay $150 in fees, and sell everything for $13,500 after 3 years.
- Net profit: 13,500 + 600 − 150 − 10,000 = $3,950.
- Total ROI: 3,950 ÷ 10,000 = 39.5%.
- Money multiple: 13,950 ÷ 10,000 = 1.395×.
- Annualized return: 1.395^(1/3) − 1 ≈ 11.74% a year.
Same ROI, very different results
| Holding period | Total ROI | Annualized return | Average profit per year |
|---|---|---|---|
| 1 year | 39.5% | 39.50% | $3,950 |
| 2 years | 39.5% | 18.11% | $1,975 |
| 3 years | 39.5% | 11.74% | $1,317 |
| 5 years | 39.5% | 6.88% | $790 |
| 7 years | 39.5% | 4.87% | $564 |
| 10 years | 39.5% | 3.38% | $395 |
A 39.5% gain over ten years is only about 3.4% a year, less than a high-yield savings account paid in 2025.
ROI, IRR and marketing ROI
ROI and CAGR suit a single investment with a single exit. When money goes in or comes out at several dates, the IRR (internal rate of return) discounts each cash flow at its own date and gives a fairer picture. In marketing, ROI is often calculated as (revenue attributable to the campaign − campaign cost) ÷ campaign cost; use gross profit rather than revenue if you want the true return.
Common mistakes
- Leaving out costs: commissions, management fees, closing and selling costs all cut into ROI.
- Ignoring taxes: in the US, gains on assets held more than a year are taxed at 0%, 15% or 20% at the federal level, while short-term gains are taxed as ordinary income.
- Forgetting inflation: subtract it from the annualized return to see your real gain.
- Ignoring risk: a high return often pays you for taking a big risk; compare like with like.