Investment Calculator

What is Return on Investment (ROI)?

ROI is an abbreviation for Return on Investment. This formula measures the gain or loss on any investment relative to its cost. The outcome can be expressed as a ratio or percentage.

Through underlying metrics, the ROI equation can be applied to everything from your personal savings account to business decisions. In short, if there is an exchange of value represented as currency, energy, or time, then a person can leverage the ROI equation to gain insight.

What is the formula for ROI?

Two different formulas are widely circulated when discussing how to calculate ROI. The output is the same regardless of which equation you choose.

The first method:

\text{ROI} = {\text{Net Return}  \above{1pt} \text{Cost}} \times 100

The Cost of an investment may include any number of factors: commissions, transaction fees, or the costs of doing business.

The second method:

\text{ROI} = {\text{Final Value} - \text{Initial Value}  \above{1pt} \text{Cost}} \times 100

In this expression, your Net Return is calculated by subtracting your initial invested sum (represented as Initial Value) from the amount that you’ve ended up with (your Final Value).

Of course, when projecting ROI you may not yet know the final value of your investment. This is where additional formulas such as Compound Interest may be necessary. Using the calculator above, you can leverage this and a variety of other supporting formulas by selecting Edit Formula.

What does a negative ROI number mean?

A negative ROI occurs when the final value of an investment is less than its initial value. In other words, a negative ROI happens any time that an investment loses rather than gains.  

What is annualized ROI?

Annualized Return on Investment is an equation that relates ROI to time by telling us Annualized Return on Investment relates ROI to time by expressing what a return becomes over the course of one year.

According to the Global Investment Performance Standards, the returns of portfolios or composites for periods of less than one year may not be annualized. This may prevent financial institutions and certified financial advisors from giving “projected” performance for a year that is not yet complete.

The calculator above may still be used to show estimated projections of annual returns at hypothetical, pre-defined rates.