Calculate return on investment with net profit, ROI percentage, and annualized returns. Compare investment performance at a glance.
Return on Investment
Net Profit
$5,000.00
Total ROI
50.00%
Annualized
14.47%
ROI is the universal metric for investment performance. If you invest $10,000 and receive $13,000 back, your net profit is $3,000 and your ROI is 30%. Simple ROI does not account for time — a 30% return over 1 year is exceptional, but 30% over 10 years is mediocre (only 2.7% annualized). Always consider the holding period when comparing investments.
Annualized ROI (CAGR) normalizes returns to a yearly rate, making different investments comparable. The formula is: (Final/Initial)^(1/years) − 1. The S&P 500 has delivered roughly 10% annualized returns since 1926. Real estate averages 3–5% annualized (before leverage). Knowing these benchmarks helps you evaluate whether a specific investment outperforms or underperforms the market.
ROI ignores risk, liquidity, and opportunity cost. A 15% ROI from a volatile cryptocurrency and a 15% ROI from a government bond are not equivalent — the bond carries far less risk. ROI also does not account for taxes, fees, or inflation. A 10% gross return with 2% fees, 25% capital gains tax, and 3% inflation yields only about 4.5% in real purchasing power.
Beyond investing, ROI is used to evaluate marketing campaigns, equipment purchases, and hiring decisions. A $50,000 marketing campaign that generates $200,000 in revenue has a 300% ROI. Most companies set a minimum ROI threshold (hurdle rate) of 15–25% for new projects. If the projected ROI falls below this threshold, the capital is better deployed elsewhere.
ROI measures total return as a percentage of the initial investment, regardless of time. CAGR (Compound Annual Growth Rate) normalizes the return to an annual rate. A 100% total ROI over 5 years equals a CAGR of 14.87%. Use ROI for quick comparisons and CAGR when time horizons differ.
It depends on the context. For stock market investments, beating the S&P 500 average of ~10% annualized is considered good. For real estate, 8–12% (including rental income and appreciation) is strong. For business investments, most companies target 15–25%+ ROI. Risk-free investments (Treasury bonds) currently yield 4–5%.
Calculate after-tax ROI by subtracting taxes from your net profit before dividing by the investment cost. Short-term capital gains (held <1 year) are taxed as ordinary income (up to 37% in the US). Long-term gains (held >1 year) are taxed at 0%, 15%, or 20% depending on income bracket.