How to Calculate ROI (Return on Investment)
ROI measures the profitability of an investment relative to its cost. It's the simplest way to evaluate and compare different investment opportunities.
ROI Formula
ROI = ((Current Value - Cost) / Cost) × 100. Example: You bought shares for ₹50,000, now worth ₹65,000. ROI = (65000-50000)/50000 × 100 = 30%.
Annualized ROI
Simple ROI doesn't account for time. Annualized ROI = ((1 + ROI)^(1/years) - 1) × 100. A 30% ROI over 3 years = 9.1% annualized. This helps compare investments of different durations.
ROI Across Investment Types
Stocks: Compare ROI of different stocks or portfolios. Real estate: Include rental income and property appreciation. Business: Calculate ROI of marketing spend, equipment, or new hires. Always include all costs for accurate ROI.