ROI Calculator

Return on investment is just the gain divided by what you put in, but it's easy to get muddled when time is involved. Enter what you invested and what it's worth now, and this calculator gives the ROI as a percentage, the profit or loss, and how many times your money grew. Add how long you held it and it also shows the average yearly growth rate.

How to use it

1. Enter the amount you invested.
2. Enter the final value, or the total returned to you.
3. Optionally add the number of years you held it.
4. Read the ROI and, if you gave a time, the yearly rate.

When it helps

• Checking how well a share, property or business purchase did.
• Comparing two investments held for different lengths of time.
• Measuring the return on an advertising spend.
• Turning a total gain into a yearly rate.

Good to know

• Plain ROI ignores time, so a 50 percent gain over ten years looks the same as over one. Use the yearly figure to compare.
• Add fees and costs to the amount invested for a truer result.
• A negative ROI means you lost money.

The formulas

ROI is the gain divided by the amount invested, expressed as a percentage: if you invest 10,000 and it's worth 14,500, the gain is 4,500 and ROI is 45 percent. To compare investments of different lengths, calculate the annualised rate, which is the final value divided by the initial value raised to the power of one over the years, minus one.

For 45 percent over three years, that's about 13.2 percent a year.

Worked example: a marketing spend

You spend 500 on adverts that bring in 2,100 of sales, with product costs of 900. The gain is 2,100 minus 900 minus 500, which is 700, and ROI on the 500 spent is 140 percent. Without including product costs, you'd see a gain of 1,600 and an ROI of 320 percent, which overstates the benefit.

Choose carefully what counts as the gain and the cost, and be consistent.

What ROI misses

ROI ignores risk, timing and effort. An investment with 20 percent ROI that could easily have lost money isn't the same as a safe one. It also ignores when the money came back: getting 40 percent after one year is far better than after five.

Use ROI alongside other measures, such as payback period, and always consider how likely the result was.

Including all costs

For a fair figure, include everything you spent: purchase price, fees, taxes, repairs, interest on borrowed money and your own time if it has value. For property, include maintenance and vacancy periods. For shares, include trading costs.

Leaving costs out makes results look better than reality, which is a common trap when reading other people's claims.

Questions