ROI Calculator
Calculate Return on Investment (ROI) with annualized returns for investments, business projects, or marketing campaigns.
1.0 years
Important: This calculator provides estimates for educational purposes. Actual returns depend on market conditions, fees, taxes, and other factors. Past performance does not guarantee future results. Consider consulting a qualified financial adviser for personalised investment advice.
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Why annualised ROI matters more than total ROI
A 50% total return sounds impressive, but it means very different things depending on the timeframe. Achieved over 1 year, it's an exceptional 50% annualised return. Achieved over 10 years, the annualised return is closer to 4.1% , a fairly modest result. Annualised ROI (also called CAGR, Compound Annual Growth Rate) strips out the effect of time so you can fairly compare investments held for different periods.
The formula this calculator uses is: ((Final Value ÷ Initial Investment)^(1 ÷ years)) − 1, expressed as a percentage.
What counts as a "good" ROI?
These are broad historical benchmarks, not guarantees, actual returns vary significantly by year, sector and risk level, and past performance never guarantees future results.
What basic ROI doesn't account for
This calculation doesn't factor in inflation, taxes (such as Capital Gains Tax), transaction fees, or ongoing costs like platform charges, all of which reduce your real-world return. For a more complete long-term picture, particularly for compounding investments, try our Compound Interest Calculator.
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Worked example: £20,000 invested, sold for £26,000
After £500 of fees, the net gain is £5,500. ROI is net gain divided by the amount invested: 5,500 ÷ 20,000 = 27.5%.
If that took three years, the annualised return is about 8.4% a year, a fairer way to compare it with other investments that ran for a different length of time.
Frequently Asked Questions
What is a good ROI?
It depends on the risk and the time period. Compare it to alternatives such as savings rates, not to a single fixed number.
Does ROI include tax?
Not unless you enter it as a cost. Tax can reduce your real return, so include it for a fair comparison.
Why does annualised ROI matter?
A 30% return over six years is much weaker than a 30% return over one year, and annualising makes that clear.
Frequently Asked Questions
What is a good ROI?
A "good" ROI depends on the investment type and risk. For stocks, 7-10% annually is historically average. For real estate, 8-12% is common. Business investments often target 15-25%+ to justify the higher risk.
How is ROI calculated?
ROI = (Gain from Investment - Cost of Investment) / Cost of Investment × 100. For example, investing £10,000 and selling for £15,000 gives a 50% ROI.
What is annualized ROI?
Annualized ROI shows the yearly return rate, accounting for the investment period. A 50% return over 5 years is about 8.4% annually, which allows fair comparison between investments of different durations.
Does ROI include taxes and fees?
Basic ROI calculations typically don't include taxes, fees, or inflation. For accurate comparisons, subtract transaction costs, capital gains tax, and consider inflation-adjusted returns.
Key Terms Explained
Plain-English definitions of the financial terms used in this calculator.
- Capital Gains Tax (CGT)
- Tax on the profit when you sell an asset, shares, crypto, or a second property, for more than you paid. Everyone has an annual CGT exemption; gains above it are taxed based on your income band.
- Rental Yield
- A property's annual rental income as a percentage of its purchase price. Gross yield ignores costs; net yield deducts expenses like maintenance, insurance and letting fees, the truer measure of return.
- ROI (Return on Investment)
- Profit from an investment expressed as a percentage of its cost. An investment of £1,000 that grows to £1,150 has a 15% ROI. Always compare ROI after fees and tax.
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Not Financial Advice: This calculator is for informational and educational purposes only. Results are estimates and do not constitute financial advice, recommendations, or regulated advice. We are not authorised or regulated by the Financial Conduct Authority (FCA). Always consult a qualified financial adviser for personalised advice. Tax treatment depends on your individual circumstances and may change. Tax laws and rates may change. Past performance does not guarantee future results.
