How to Measure ROI (Return on Investment) and Profitability
Learn the formulas for calculating simple ROI and annualized rate of return (CAGR) for stocks, property, or business.
Why Calculate Return on Investment (ROI)?
Return on Investment (ROI) is a key financial metric used to evaluate the efficiency or profitability of an investment. It helps you compare different investment opportunities or track the historical performance of your assets.
Measure your investment gains now: [ROI Calculator](/tools/roi-calculator).
The Simple ROI Formula
The formula for calculating simple ROI is:
ROI (%) = [(Gain from Investment - Cost of Investment) / Cost of Investment] x 100
While simple ROI is useful for quick checks, it has a significant drawback: it does not account for the length of time an investment is held.
Why Annualized ROI Matters
An investment that returns 50% over 10 years has a much lower annual growth rate than one returning 50% in 2 years. Annualized ROI calculates the geometric average annual return, allowing for fair comparisons across different holding periods.
Calculate both simple and annualized ROI with our free, secure [ROI Calculator](/tools/roi-calculator).
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