ROI Calculator

ROI = (Gain - Cost) / Cost × 100%. Example: invest $10K, return $15K → ROI = 50%. For multi-year investments, annualize using: Annualized ROI = ((1 + ROI)^(1/years)) - 1. A 50% total return over 3 years equals roughly 14.5% annualized. Always compare ROI on an annualized basis when the holding periods differ, otherwise short-term and long-term investments look deceptively similar.

ROI benchmarks differ substantially by asset class. Public equities have returned roughly 10% annually over long periods. Investment-grade bonds currently yield 4-5%. Residential real estate has historically returned 7-10% including appreciation and rental income. Direct business investments typically need to clear 15-25% to justify the higher risk, illiquidity, and management burden. Marketing ROI: 5:1 is the minimum worth sustaining; 10:1 or better is healthy. The key comparison is always the best available alternative use of capital at equivalent risk.

NPV (net present value) for long-term projects with multiple cash flows. ROI for simple, short-term comparisons. NPV accounts for time value of money. ROI is easier to communicate. Use both - they should agree on go/no-go decisions.