Calculate the return on investment (ROI) of any project, purchase or investment, plus the annualized return so you can compare options held for different lengths of time.
What is ROI?
Return on investment (ROI) measures how much you gained or lost compared with what you put in. It works for almost anything: a marketing campaign, new equipment, a rental property, a training course or a stock.
ROI = (amount returned − amount invested) ÷ amount invested × 100
Worked example
You invest $10,000 in new equipment, and over 3 years it brings in $14,500 of extra profit. Your gain is $4,500, so ROI is $4,500 ÷ $10,000 = 45%.
Annualized ROI: comparing different time periods
A 45% return sounds better than 30%, but not if it took three times as long. Annualized ROI converts any return into a yearly rate:
Annualized ROI = (amount returned ÷ amount invested)1 ÷ years − 1
In the example, 45% over 3 years is about 13.2% a year. A different project returning 30% in 1 year (30% a year) would actually be the better use of money.
What to include in the cost
- Everything you paid: purchase price, setup, fees, training and your time if it has a real cost.
- Ongoing costs: maintenance, subscriptions or ad spend over the period.
- For marketing ROI: use the gross profit from sales, not total revenue, or ROI will look better than it is.
Limits of ROI
- It ignores risk: a safe 8% may be better than a risky 15%.
- Simple ROI ignores timing, which is why annualized ROI matters.
- It ignores cash flow along the way. For investments with regular contributions, use the investment return calculator.
Frequently asked questions
What is a good ROI?
It depends on the risk and the alternatives. A useful benchmark is what the money could earn elsewhere with similar risk, such as a savings account for safe money or a broad index fund for long-term investing.
Can ROI be negative?
Yes. A negative ROI means you lost money: you got back less than you put in.
Related tools
Results are estimates for planning and education only. They are not financial, tax, legal or medical advice. Check important numbers with a qualified professional.