ROI Calculator Guide: What Is Return on Investment?
ROI is the single most important number for comparing investments. Here's how to calculate it, what it means, and how to annualise it for fair comparisons.
The ROI Formula
Buy shares for ₹50,000 | Sell for ₹65,000
Net Profit = ₹15,000
ROI = 30%
Cost ₹2,00,000 | Revenue ₹2,80,000
Net Profit = ₹80,000
ROI = 40%
Annualised ROI
Basic ROI ignores time. A 50% ROI over 10 years is worse than 50% in 2 years. Use annualised ROI to compare fairly:
| Total ROI | 1 Year | 3 Years | 5 Years | 10 Years |
|---|---|---|---|---|
| 50% | 50%/yr | 14.5%/yr | 8.4%/yr | 4.1%/yr |
| 100% | 100%/yr | 26%/yr | 14.9%/yr | 7.2%/yr |
Frequently Asked Questions
What is a good ROI percentage?
It depends on the investment type and risk. Stock market historically delivers 10–12% annual ROI. Real estate varies widely (5–15%). A savings account offers 3–4%. As a rule: higher potential ROI = higher risk. Compare against a risk-free benchmark like FD rates.
What is the ROI formula?
ROI (%) = [(Net Profit ÷ Cost of Investment) × 100]. Net Profit = Final Value − Initial Investment. For example, invest ₹50,000, get back ₹65,000: Net Profit = ₹15,000, ROI = (15,000 ÷ 50,000) × 100 = 30%.
Does ROI account for time?
Basic ROI does not account for the time period. To compare investments of different durations, use Annualised ROI = [(1 + ROI)^(1/years) − 1] × 100. A 30% ROI over 3 years = (1.30)^(1/3) − 1 = 9.1% per year.
What is the difference between ROI and ROE?
ROI (Return on Investment) measures gain relative to total investment cost. ROE (Return on Equity) specifically measures profit relative to shareholder equity in a company. ROI is more general; ROE is used in corporate finance and stock analysis.
Can ROI be negative?
Yes. A negative ROI means you lost money on the investment. If you invested ₹1,00,000 and got back ₹80,000, ROI = (−20,000 ÷ 1,00,000) × 100 = −20%. Understanding the risk of negative ROI is key to any investment decision.
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