2026-02-14 • Updated 2026-02-14 • 10 min read
How to Calculate ROI on Investments (With Examples and Calculator)
Learn how to calculate ROI using the ROI formula, practical examples, and an investment ROI calculator for fast scenario testing.
By InterestCal Editorial
How to Calculate ROI
Return on Investment (ROI) is one of the simplest performance metrics in finance. It shows how much gain or loss you generated relative to your initial cost.
The easiest way to compute it is with the Investment ROI Calculator, especially when comparing multiple scenarios quickly.
ROI Formula
ROI = (Final Value - Initial Cost) / Initial Cost. Multiply by 100 to express it as a percentage.
Example: if you invest $8,000 and end with $10,000, ROI is (10,000 - 8,000) / 8,000 = 25%.
What ROI Tells You and What It Doesn’t
ROI tells you total profitability over the measurement period. It is useful for quick decisions and post-investment reviews.
ROI does not include time normalization. A 25% ROI over 1 year is very different from 25% over 7 years. For that, use CAGR via the ROI + CAGR Calculator.
Using ROI in Portfolio Decisions
ROI works well as an initial filter, but stronger decisions combine ROI with annualized return, liquidity, and downside risk.
If you are evaluating growth targets, pair ROI checks with long-horizon projections in the Investment Growth Calculator.
Common ROI Mistakes
Common mistakes include ignoring fees, taxes, and holding period differences. These can make apparent ROI less meaningful in real-world performance.
Also compare outcomes in real terms by checking inflation impact with the Inflation Calculator.
Conclusion
The ROI formula is simple, but interpretation requires context. Use ROI for total return, then layer CAGR and risk to improve investment decisions.
For direct comparison intent, review ROI vs CAGR.
Frequently Asked Questions
What is the standard ROI formula?
ROI = (Final Value - Initial Cost) / Initial Cost, typically shown as a percentage.
How do I calculate ROI quickly?
Enter initial cost and final value into an ROI calculator to get instant percentage return.
Is ROI enough for comparing long-term investments?
Not always. Add CAGR to compare investments across different durations.
Should fees and taxes be included in ROI?
Yes, whenever possible, because they materially affect net investor returns.
Can ROI be negative?
Yes. If final value is below initial cost, ROI will be negative.
