How ROI is calculated
ROI compares net gain with the initial cost. Include income and fees when they apply, because a bare buy/sell calculation can overstate returns when costs are ignored.
Example
If you invest $10,000, receive $500 income, pay $200 in fees and sell for $12,500, net gain is $2,800 and total ROI is 28%. Over two years, the annualized return is lower than 28% per year because the gain is spread over time.
Common mistakes
Include fees, income and the holding period. Comparing a one-month ROI with a five-year ROI without annualizing can make returns look misleading.
Annualized ROI
Total ROI and annualized ROI answer different questions. A 30% total return over two years is not the same as 30% per year, so this calculator shows both when a holding period is entered.
Limitations
- This is not investment advice.
- Taxes, risk, timing of cash flows and inflation are not modeled.
- For irregular cash flows, use an internal rate of return method instead.
References
- Investor.gov: Annual return - return concept reference, accessed 2026-05-17.
Last reviewed: 2026-05-17