Return on Investment (ROI) Calculator
Calculate the profitability of an investment.
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Measure Your Investment's Profitability
Return on Investment (ROI) is a fundamental performance measure used to evaluate the efficiency and profitability of an investment. This calculator helps you determine the ROI by comparing the net profit from an investment to its initial cost. It's a simple way to gauge the success of a business venture, stock purchase, or any other financial commitment.
The ROI Formula Explained
ROI (%) = (Net Profit / Cost of Investment) * 100 Where:
- Net Profit =
Final Value of Investment - Initial Investment - Cost of Investment =
Initial Investment
How to Use the Calculator
- Initial Investment: Enter the total cost of your investment.
- Final Value of Investment: Enter the value of your investment at the end of the period.
- Calculate: The tool will display the net profit and the ROI as a percentage.
Real-World Example
You bought a stock for $1,000. A year later, you sell it for $1,250.
- Initial Investment: $1,000
- Final Value: $1,250
- Net Profit:
$1,250 - $1,000 = $250 - ROI Calculation:
($250 / $1,000) * 100 = 25% - Your Return on Investment was 25%.
Frequently Asked Questions (FAQ)
- Does ROI account for time? No, standard ROI does not consider the length of the investment period. A 10% ROI over one year is much better than a 10% ROI over five years. For comparing investments over different timeframes, metrics like Annualized ROI or Compound Annual Growth Rate (CAGR) are more useful.
- Does ROI include all costs? For an accurate ROI, your 'Initial Investment' should include all costs associated with the investment, such as fees, commissions, and taxes. This calculator uses a simplified model, but you should factor in those extra costs for real-life analysis.
- What is a good ROI? A 'good' ROI is relative. It depends on the risk of the investment. A high-risk venture might require a potential ROI of 30%+ to be attractive, while a low-risk bond might be considered good with a 5% ROI. A common benchmark is to aim for an ROI that beats the average annual return of the stock market (around 7-10%).