How this calculator works
This calculator helps you measure the return on an investment in three clear steps. First enter the amount you put in at the start of the investment. Second enter the value you have at the end of the period you are measuring. Third enter how many years you held the investment. The calculator finds net profit by subtracting the initial investment from the final value. It finds the return on investment by dividing the net profit by the initial investment then converting the result to a percentage. For investments that last more than one year the calculator converts total return to an annualized rate which shows the average yearly growth adjusted for compounding. Annualized rates give a clearer comparison when you look at different investments with different time spans.
Why you need these numbers
ROI is a simple measure that shows how efficient an investment was. Net profit shows how much money you gained or lost in absolute terms. Annualized return makes it easy to compare opportunities that last different lengths of time. Together these numbers help you evaluate business projects rental properties stocks or small ventures. Use the results to compare ideas before you commit money or to review performance after the fact.
Practical examples
Example one. You invest ten thousand dollars in a small project and after one year the value is twelve thousand five hundred dollars. Net profit is twenty five hundred dollars. ROI is twenty five percent. Annualized return is also twenty five percent because the time period is one year. Example two. You invest ten thousand dollars and after three years the value is sixteen thousand dollars. Net profit is six thousand dollars. Total return is sixty percent but the annualized return is the compound rate that turns ten thousand into sixteen thousand over three years. That is roughly seventeen point seven percent per year. Use the calculator to test numbers quickly and to see how time affects the yearly rate.
Things to keep in mind
This tool assumes the values you enter capture the full cash flow at the start and at the end. It does not include additional deposits withdrawals fees taxes or other costs unless you enter them in the values. For accurate decision making include fees and taxes in the amounts you provide. For investments with multiple cash flows use a dedicated cash flow calculator or internal rate of return calculator which can handle several contributions and withdrawals over time.
Actionable next steps
Start by trying realistic numbers for your case. If the result looks attractive make a list of fees and expected taxes then run the numbers again with those costs included. Compare the annualized rate to alternative uses of capital such as a savings account or other investments. If you need to include regular contributions switch to a cash flow tool. If you are not sure how to count fees consult a financial professional before making a decision based solely on this tool.
Questions people ask
How do I handle fees
Include fees in the initial or final amount that they affect. If you pay fees at purchase add them to the initial investment. If fees are taken at sale subtract them from the final value.
What if I add money later
Use a cash flow calculator that supports multiple contributions and withdrawals. This simple tool expects one starting investment and one ending value.
Is this suitable for comparing projects
Yes annualized return makes comparison easier when projects have different lengths. Always include realistic costs and taxes when comparing.