ROI Calculator
Calculate Return on Investment (ROI) for any investment. Compare profitability across different opportunities and make informed investment decisions.
ROI Results
Investment Analysis
Market Benchmarks (2024)
S&P 500 Average: 10-12% annually
Real Estate: 8-10% annually
Bonds: 4-6% annually
Savings Account: 2-4% annually
Note: Past performance not indicative of future results
Understanding Return on Investment (ROI)
Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment. It calculates the return generated relative to the cost of the investment, expressed as a percentage.
ROI Formula
ROI is calculated as:
ROI = [(Final Value - Initial Investment) ÷ Initial Investment] × 100
Or: ROI = (Net Profit ÷ Cost of Investment) × 100
Types of ROI
- Gross ROI: Total return without considering time or additional costs
- Net ROI: Return after subtracting all costs and fees
- Annualized ROI: Average annual return over the investment period
- Simple ROI: Basic percentage return calculation
- Risk-Adjusted ROI: Return adjusted for investment risk
ROI Applications
- Stock Investments: Compare performance of different stocks
- Real Estate: Evaluate property investment returns
- Business Ventures: Assess profitability of business investments
- Marketing Campaigns: Measure marketing spend effectiveness
- Capital Projects: Evaluate equipment and facility investments
Interpreting ROI
| ROI Range | Interpretation | Investment Quality |
|---|---|---|
| ROI > 50% | Excellent return | High quality |
| 25% < ROI = 50% | Very good return | Good quality |
| 10% < ROI = 25% | Good return | Average quality |
| 0% < ROI = 10% | Modest return | Below average |
| ROI = 0% | Break-even | No profit/loss |
| ROI < 0% | Loss on investment | Poor quality |
ROI vs. Other Metrics
- ROI vs. IRR: ROI doesn't consider time value of money; IRR does
- ROI vs. ROA: ROI measures investment efficiency; ROA measures asset efficiency
- ROI vs. ROE: ROI measures investment returns; ROE measures equity returns
- ROI vs. CAGR: ROI is total return; CAGR is annualized growth rate
Limitations of ROI
- Time Factor: Doesn't account for investment duration
- Risk: Doesn't consider risk-adjusted returns
- Cash Flow: Ignores timing of cash flows
- Inflation: Doesn't adjust for purchasing power changes
- Comparability: May not be comparable across different investment types
Improving ROI
- Reduce Costs: Minimize investment and operating expenses
- Increase Revenue: Boost income from the investment
- Optimize Timing: Buy low and sell high
- Diversify: Spread investments across different assets
- Regular Monitoring: Track performance and adjust strategy
Tip: ROI is a simple and effective way to compare investment opportunities. Use it alongside other metrics like IRR, payback period, and risk analysis for comprehensive investment evaluation. Remember that higher ROI often comes with higher risk.