How to use this roi calculator
Enter the original investment before purchase costs, then add any separately stated purchase costs. Enter ending value or sale proceeds before exit costs, cash income paid out during the holding period, and additional exit costs. Do not enter income already included through reinvestment in the ending value. Supply a positive holding period in years for the terminal-only annualized calculation. The tool always reports total ROI, but does not annualize when cash income is entered or net proceeds are negative. Use the same currency throughout; changing its label does not convert the amounts.
How the calculation works
ROI is profit divided by the defined initial cost, expressed as a percentage. This page defines total initial cost as original investment plus purchase costs. Net proceeds equal ending value plus separately paid cash income minus exit costs. Profit is net proceeds minus total initial cost. Stating the denominator is important because a return based on original price alone differs from one based on all initial cash committed to the transaction.
Ending value can be a current valuation rather than an actual sale. In that case, the calculation is an illustration based on an unrealized value, not a completed profit. If sale proceeds are already net of exit costs, do not subtract those costs again. Likewise, if the initial investment input already includes purchase fees, the extra purchase-cost field should not repeat them. A clear ledger is more important than precision in the displayed percentage.
Cash income means amounts paid separately and not already embedded in ending value, such as a distribution retained outside the investment. Reinvested income that increased the ending value is already present there and should not be added again. The tool aggregates the cash amounts for holding-period ROI but does not use their payment dates. It therefore cannot calculate a money-weighted or time-weighted return from a transaction history.
A total ROI of 20% means net profit equals twenty percent of this page's defined initial cost. It does not mean twenty percent per year. The same total profit achieved over one year or five years has the same holding-period ROI. Time matters when comparing opportunities, so the tool also accepts years for a restricted annualized calculation. Dividing ROI by years generally does not provide a compounded annual return.
When there is no interim cash income and net terminal proceeds are nonnegative, annualized return is [(net proceeds/initial cost)^(1/years) − 1] × 100. This treats one initial cash outlay and one terminal recovery. Zero terminal proceeds correspond to a complete loss and a −100% annualized result. If income was paid during the interval, the tool marks annualization unavailable rather than pretending it all occurred at the end.
Losses are supported. If ending proceeds are below initial cost, ROI and profit are negative. Additional exit costs can even produce negative net proceeds, making ROI less than −100%. Such a result describes the entered extra liability, not a mathematical error. Fractional powers of a negative proceeds ratio do not supply a meaningful CAGR, so annualization is unavailable in that case while the total-cost calculation remains visible.
Formulas
Cost and proceeds
Profit and holding-period ROI
Terminal-only annualized return
Worked examples
Transaction costs change the denominator
An investment costs 10,000 plus a 100 purchase fee, giving an initial cost of 10,100. It ends at 12,500 before a 50 exit cost, with no cash income. Net proceeds are 12,450 and profit is 2,350. Total ROI is 2,350/10,100 × 100 ≈ 23.27%, not the 25% calculated from price growth alone.
Annualization is not division
A single 10,000 outlay recovered as 12,100 exactly two years later has 21% total ROI. Its terminal annualized rate is (12,100/10,000)^(1/2) − 1 = 10%. Dividing 21% by two would give 10.5%, which does not reproduce compounded annual growth.
Income and losses need careful interpretation
With initial cost 1,000, ending value 900, cash income 50, and no fees, proceeds are 950, profit is −50, and total ROI is −5%. The income reduces the loss but does not eliminate it. Annualization is unavailable because its timing is not collected. A separate no-income example with zero ending proceeds gives −100% ROI.
Common uses
Review a completed transaction
Enter the purchase amount, costs, sale proceeds, and separately paid income from a clearly defined transaction. Check that each cash amount is included once. The result gives a transparent profit and holding-period percentage, but it cannot establish tax profit, which can depend on cost-basis rules and adjustments outside this simple calculation.
Compare cost definitions
Try the same price change with different stated purchase and exit charges. The resulting ROI demonstrates how the denominator and proceeds affect a comparison. When another site reports a different return, inspect whether its quoted amount includes fees, treats distributions separately, or uses a different initial-cost convention before judging the arithmetic.
Distinguish total return from annual growth
For one initial outlay and one terminal recovery, compare ROI with the separate annualized result. Changing years leaves total ROI unchanged but changes CAGR. Do not compare a one-year and ten-year holding period as though equal total percentages mean equivalent opportunities; risk, liquidity, tax, and the timing of money still matter.
Accuracy and limitations
The calculation follows the displayed cost-and-proceeds convention and retains full numeric precision until presentation. Original investment must be positive to provide a meaningful denominator. Negative profit is preserved. Annualization is intentionally unavailable for interim income or negative net proceeds, and extremely large numerical results are rejected rather than formatted as valid returns.
This calculator is not an accounting standard, an IRR or XIRR implementation, or a measure of risk-adjusted performance. It does not compare investments for suitability, estimate future values, derive financing costs, or account for jurisdiction-specific taxes. A current valuation can change and is not automatically realizable at that price. Verify the transaction record and professional requirements for a real decision.
Sources and methodology
These references support the formulas and financial concepts explained on this page. Product-specific rates, fees, and contract conventions still need to be checked with the provider.
Frequently asked questions
Is ROI automatically annual?
No. ROI is the total return over the holding period. The separate terminal-only annualized output uses a compounded formula under restricted cash-flow assumptions.
Why are purchase costs included in the denominator?
This page defines initial cost as all entered money committed at purchase. Other ROI conventions may use another denominator, so compare definitions.
Should I add reinvested dividends as income?
Not when they are already included in ending value. Add only separately paid cash income that has not otherwise been counted.
Why is annualized return unavailable with cash income?
The input does not collect payment dates. A valid dated cash-flow return requires a different method rather than treating interim income as terminal proceeds.
Can ROI be below −100%?
Yes when entered additional costs make net proceeds negative. The percentage describes a loss greater than the initial cost, but CAGR is unavailable.
Does this calculate tax or IRR?
No. Tax, dated cash flows, IRR, leverage, and business-specific accounting returns are not modeled.