The ROI formula
ROI
(Final value − cost) ÷ cost × 100. Invest 10,000 and get back 12,500: 25%.
Cost
The amount invested plus fees and other costs, since they’re part of what you paid.
Annualized
With a holding period: (value ÷ cost)^(1 ÷ years) − 1. 25% over 2 years is 11.80% a year.
Why annualized matters
Compare fairly: 30% over 5 years is less than 20% in one year; annualizing puts them on one scale.
Property: Add purchase and upkeep costs to fees, and rent received to the final value.
Losses: If the value is below cost, the ROI shows negative with the loss.
Pricing: For product pricing, use the Margin Calculator.
FAQ
How do I calculate ROI?
Subtract the cost from the final value, divide by the cost and multiply by 100.
What’s the difference between ROI and annualized return?
ROI is the total return over the whole period; the annualized return spreads it over the years.
What about dividends?
Add them to the final value or amount returned.