Investing Basics

What Is ROI?

Return on investment (ROI) measures the gain or loss from an investment relative to its cost, expressed as a percentage. The basic formula is ROI = (amount returned − amount invested) ÷ amount invested × 100. It can be applied to projects, purchases, marketing campaigns, or financial assets.

Example

Spending 2,000 and getting back 2,600 gives a net gain of 600 and an ROI of 30%.

ROI vs. Annualized ROI

Basic ROI ignores time: 30% over one year and 30% over five years look identical. Annualized ROI converts the result to an equivalent yearly rate: ((amount returned ÷ amount invested)^(1/years) − 1) × 100, which is the same idea as CAGR.

Limitations

ROI does not account for risk, and the result depends on which costs are included, so two ROI figures are only comparable if they are calculated the same way.

🧮 Calculate It Yourself

Put Return on Investment (ROI) into practice with these free calculators — no sign-up, nothing stored.

📐 ROI Calculator Return on investment, net gain, and annualized ROI — any currency. Calculate → 📈 CAGR Calculator Find your investment's true annualized return. Calculate → 📊 Break-Even Point Calculator How many units do you need to sell before your side business profits? Calculate →

🔗 Related Terms

Compound Annual Growth Rate (CAGR) Capital Gain Break-Even Point Real Rate of Return Dividend Yield

More Investing Basics Terms

📖 Browse all glossary terms or explore all free calculators.

Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.