What next?
ROI ignores time. These add it back.
What your result means
ROI is the total percentage gain over the whole holding period, regardless of how long that was. Annualised return converts it into a per-year rate, which is the only fair way to compare a three-year investment with a ten-year one. A 50% ROI is excellent over two years and unremarkable over twenty.
Why this one is different
Total return and annualised return are reported side by side, because a 45% gain means something different over three years than over ten. The money multiple and the time it would take to double at the same rate are included, which is how an investment gets compared with one held for a different length of time.
Total return flatters slow investments
Two assets both returning 60% look identical until you notice one took four years and the other took twelve. Annualised, that is 12.5% a year against 4% — a completely different proposition.
Whenever someone quotes a headline return without a time period attached, the period is usually the least flattering part of the story. Ask for it, then annualise.
How it works
ROI divides the net gain by the amount invested. The annualised figure — the compound annual growth rate — is the constant yearly rate that would take the initial amount to the final value over the same period, found by taking the nth root of the money multiple.
How to use this calculator
- Choose your currency.
- Enter the amount invested, including fees and costs if you want a true net figure.
- Enter the final value — what it sold for or is worth today.
- Enter the holding period in years.
- Compare the annualised return, not the headline ROI.
Formula
V = final value, C = amount invested, t = years held.
Example calculation
£10,000 invested, worth £14,500 after 3 years:
ROI = +45.0%
Annualised return ≈ +13.2% a year
Frequently asked questions
Should I include fees and dividends?＋
Yes, for an honest figure. Add purchase costs, platform charges and taxes to the amount invested, and include reinvested dividends or rent in the final value. Excluding them systematically overstates returns.
What is a good ROI?＋
Only meaningful against an alternative. Compare the annualised figure with a broad market index over the same period and with the risk-free rate — beating neither means the risk was not rewarded.
Can ROI be negative?＋
Yes. If the final value is below what you put in, both ROI and the annualised return are negative, and the money multiple falls below one.
Why does ROI ignore time?＋
Because it compares gain to cost with no reference to how long the money was committed. A thirty per cent return over one year and over ten years give the same ROI and are completely different investments. Where time varies, an annualised measure is the fairer comparison.
Should I compare ROI against doing nothing?＋
Yes, and it is the comparison most often skipped. The relevant benchmark is not zero but what the money would have earned in its next best use — paying down debt, or a low-risk account. A positive ROI that underperforms the alternative has still cost you something.
How do I handle an investment with ongoing costs?＋
Include every cost in the denominator, not just the initial outlay. Maintenance, fees, insurance and your own time all reduce the real return, and leaving them out is the most common way ROI gets overstated. If your time is a material input, price it.
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Assumptions & limitations
Every figure here comes from a simplified model. Keep these limits in mind when reading your result:
- Assumes a single lump sum in and a single value out — regular contributions need a money-weighted return instead.
- Ignores tax unless you include it in the amounts you enter.
- Annualised return assumes smooth compounding; actual year-by-year results will vary.