What return on investment tells you
Return on investment (ROI) expresses profit as a percentage of the money you put in, which makes wildly different investments directly comparable. A $500 gain sounds good until you learn it came from a $50,000 outlay (a 1% return); the same $500 from a $2,000 outlay is a 25% return. Converting everything to a percentage strips away the raw dollar amounts and shows efficiency.
How to use the ROI calculator
Enter the initial investment (what you paid, including fees where you can) and the final value (what it is now worth or sold for). The calculator returns your ROI percentage and your net dollar gain or loss.
The formula
ROI = (Final value − Initial value) ÷ Initial value × 100. Turning $10,000 into $15,000 is (15,000 − 10,000) ÷ 10,000 × 100 = 50%. A negative result simply means the investment lost value.
The limitation you must remember
Basic ROI ignores time. A 50% return earned over one year is far more impressive than the same 50% earned over ten years, yet plain ROI reports them identically. When comparing investments held for different lengths of time, use annualised ROI (which spreads the return across the years) for a fair comparison. ROI also ignores risk, so a high figure is not automatically a good investment — a modest, reliable return can be worth more than a large but uncertain one.