ROI Calculator — Return on Investment, Annualized ROI & CAGR
Calculate the return on investment for any scenario in seconds. Enter your invested amount and total return to get ROI percentage, net profit, investment gain ratio, annualized ROI, and CAGR — all in one free online tool, with no signup required.
Whether you're evaluating a marketing campaign, a business project, a real estate property, or a financial investment, this ROI calculator gives you the numbers you need to make a confident decision.
How to Use the ROI Calculator
- Choose your mode — Select Simple ROI for a total return percentage, or Annualized ROI to compare investments of different durations.
- Enter your investment — Type the total cost of the investment (purchase price, ad spend, project budget, etc.).
- Enter the return — Type the total value received or generated (sale price, revenue, final portfolio value).
- For annualized mode — Enter the time period in years (decimals allowed, e.g. 1.5 for 18 months).
- Click Calculate — Results appear instantly: ROI %, net profit, and gain ratio (or annualized ROI, CAGR, and payback period).
What Is ROI and How Is It Calculated?
ROI (Return on Investment) is the most widely used financial metric for evaluating the efficiency of an investment. It expresses how much profit or return you generate relative to the cost, as a percentage.
The ROI formula:
ROI = [(Return − Investment) / Investment] × 100
Example: A marketing campaign costs $5,000 and generates $18,000 in revenue.
- Net profit: $18,000 − $5,000 = $13,000
- ROI = ($13,000 / $5,000) × 100 = 260%
This means for every $1 invested, you earned $2.60 in profit.
Simple ROI vs. Annualized ROI
Simple ROI tells you the total return over the entire period, regardless of how long the investment lasted. It's ideal for comparing options with the same time horizon.
Annualized ROI adjusts for time, converting any total ROI into an equivalent yearly rate. This makes fair comparisons possible: a 50% ROI over 1 year is far more impressive than a 50% ROI over 5 years. The annualized formula:
Annualized ROI = [(1 + ROI)^(1/n) − 1] × 100
Where n is the number of years. Example: 80% total ROI over 3 years → Annualized ROI = 21.6% per year.
What Is CAGR?
CAGR (Compound Annual Growth Rate) is the standard metric in finance for comparing the growth of investments over different time periods. Mathematically, CAGR is identical to annualized ROI — it represents the constant annual growth rate that would take your investment from start value to end value.
CAGR is the number you see in investment fund performance reports, startup pitch decks, and financial analysis. It removes the volatility of year-to-year changes to show smooth, comparable growth.
Common Use Cases
- Marketing campaigns: Calculate whether ad spend, content investment, or campaigns generate more revenue than they cost. A 300–500% ROI is commonly cited as healthy for paid advertising.
- Business projects: Evaluate whether hiring, new equipment, or software investments justify the cost. Include all costs: labor, implementation, maintenance.
- Real estate investments: For rental properties, ROI = (annual rental income − annual expenses) / total investment. For property flips: (sale price − purchase price − costs) / total invested.
- Financial investments: Compare stocks, funds, or bonds using annualized ROI so different holding periods are fairly evaluated. Use CAGR to benchmark against index funds.
- Startup and tech ROI: Assess SaaS implementations, product launches, or R&D projects. A 150–300% ROI over 3 years is a typical benchmark for enterprise software.
Frequently Asked Questions
What is the difference between ROI and ROAS?
ROI (Return on Investment) measures net profit as a percentage of total investment cost — it deducts all costs, including cost of goods, margins, and overhead. ROAS (Return on Ad Spend) measures gross revenue generated per dollar of ad spend, without deducting other costs. ROAS = Revenue ÷ Ad Spend. A 400% ROAS means $4 in revenue per $1 spent, but the actual ROI will be lower once you account for margins and other expenses. Use ROAS to track advertising efficiency; use ROI for overall profitability.
What is annualized ROI and when should I use it?
Annualized ROI converts a total return over any period into a per-year rate for fair comparison. Use it whenever you're comparing investments with different time horizons — a 60% ROI over 2 years is not the same as 60% over 6 years. Annualized ROI = [(1 + Total ROI)^(1/n) − 1] × 100, where n is years. Always use annualized ROI when comparing funds, stocks, or any long-term investment against benchmarks like the S&P 500's historical 7–10% annual return.
What is a good ROI percentage?
It depends entirely on context and risk. For stock market investments (long-term), 7–10% annually is considered solid (S&P 500 historical average). For real estate, 8–12% annualized is typical. For marketing and paid ads, 300–500% ROI (3–5x ROAS) is a widely used benchmark. For business projects, the ROI should exceed the company's cost of capital (WACC). Always compare against available alternatives — the opportunity cost matters as much as the absolute number.
Can ROI be negative?
Yes. Negative ROI means the investment lost money — the total return was less than the cost. Example: invest $1,000, get back $800 → ROI = [(800 − 1000) / 1000] × 100 = −20%. A negative ROI isn't always a failure: some investments (R&D, brand building) generate returns that are hard to quantify short-term. Context and time horizon matter.
How do I calculate ROI for a marketing campaign?
Marketing ROI = [(Revenue generated − Campaign cost) / Campaign cost] × 100. For a $2,000 campaign that generates $8,000 in sales: ROI = ($6,000 / $2,000) × 100 = 300%. For e-commerce, use gross profit (not revenue) to account for cost of goods. For longer campaigns, consider using annualized ROI so you can compare against other investments.
What is payback period and how does it relate to ROI?
Payback period is the time it takes to recover the initial investment from net returns. Formula: Payback = Investment / Annual net return. While ROI measures profitability (how much you gain relative to cost), payback period measures speed of recovery (how long until you break even). A high ROI with a very long payback period may not be worth the wait. Both metrics together give a more complete picture of an investment's quality.
Does the ROI formula account for inflation?
Standard ROI does not adjust for inflation. If your investment returns 8% but inflation runs at 4%, your real return is approximately 4%. For long-term investments (5+ years), consider using real ROI: Real ROI ≈ Nominal ROI − Inflation rate. This is especially important for real estate and fixed-income investments where inflation can significantly erode purchasing power.
Resources
- Investopedia — Return on Investment (ROI) — Comprehensive reference on the ROI formula, variants, and applications across asset classes.
- Wikipedia — Rate of Return — Covers simple ROI, annualized return, CAGR, and the mathematical relationships between them.
