Quick answer
$10,000 that grows to $14,500 over 3 years is a 45% return on investment, or 13.2% a year compounded. At that annual rate the money would double in about 5.6 years. ROI alone hides the time it took, which is why the calculator shows the annualized figure next to it.
How the ROI Calculator works, step by step
Enter what you invested, what you got back, and how long the money was in. ROI is the profit divided by the amount invested, times 100. On $10,000 invested and $14,500 returned, the profit is $4,500 and the ROI is 45%. The figure is before tax and inflation, so it is a gross return, not what you keep.
The annualized return, or CAGR, spreads the gain evenly across the years so investments of different lengths can be compared. The same 45% total return is 13.2% a year over 3 years, but only 7.7% a year over 5 years. A total return without a time period is not comparable to anything. Always compare annualized returns, never headline totals, when the holding periods differ.
The doubling time shows how long the same annual rate would take to double the investment. At 13.2% a year, $10,000 becomes $20,000 in about 5.6 years. The growth chart plots the balance year by year at that steady rate, which is a smoothed picture: real investments bounce around the average rather than following it. A steady 13.2% and a volatile 13.2% average are very different experiences for the investor.
ROI treats a dollar returned in year one the same as a dollar returned in year ten, which is its main weakness. It ignores when the money came back, what else the money could have done meanwhile, and the risk taken to earn it. Use it for simple comparisons, and use the annualized figure or a proper discounted return for anything with uneven cash flows.
For a business, the invested figure should include everything the return cost: the purchase price, fees, and any money spent improving or promoting the asset. Leaving costs out inflates the ROI and makes a mediocre deal look good. The calculator takes the numbers as given, so the honesty of the result depends on the honesty of the inputs.
The formula
Profit = amount returned minus amount invested. ROI = profit divided by amount invested, times 100. Annualized ROI (CAGR) = (amount returned divided by amount invested) to the power of (1 divided by years), minus 1, times 100. Doubling time = ln(2) divided by ln(1 plus the annualized rate).
Worked example — try it on the calculator above
Worked example: $10,000 invested, $14,500 back, 3 years
$10,000 invested returns $14,500 after 3 years. Profit is $4,500 and ROI is 45%. The annualized return is the cube root of 1.45 minus 1, or 13.2% a year. At 13.2% a year the investment would double in about 5.6 years, and every $1 invested returns $1.45. The same $4,500 profit over 5 years instead of 3 would still be a 45% ROI, but only 7.7% a year, which shows why the time period matters more than the headline percentage. After tax at a 15% long-term capital gains rate, the $4,500 profit would keep $3,825, an after-tax ROI of 38.3%.
Frequently Asked Questions
What is a good ROI?
It depends on the risk and the time. A 13.2% annualized return beats long-run stock market averages, while a 45% total return over 10 years is only 3.8% a year and trails them. Judge any ROI against the annualized rate and the risk taken, not against the headline percentage alone.
What is the difference between ROI and CAGR?
ROI is the total gain over the whole holding period, whatever its length. CAGR is the steady annual rate that produces the same total, so it allows fair comparisons between investments held for different lengths. A 45% ROI is 13.2% a year over 3 years but 7.7% a year over 5 years.
Does ROI include tax and inflation?
No. The calculator's ROI is a gross figure before tax, inflation and fees you did not enter. A $4,500 profit taxed at 15% keeps $3,825, and inflation over the holding period takes more. Enter all costs in the invested figure and treat the result as a before-tax return.
Can ROI be negative?
Yes. If the amount returned is less than the amount invested, the profit is negative and so is the ROI. A $10,000 investment that returns $8,000 is a 20% loss. The annualized figure is not shown for a loss, because the compounding formula needs a positive final value.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.