How to Calculate Return on Investment (ROI) Across Stocks, Real Estate & Business

Return on Investment (ROI) is the universal metric used by investors, fund managers, and entrepreneurs to measure the efficiency and profitability of an investment.

Comparing a 15% stock gain over 6 months to a 40% real estate profit over 5 years requires standardizing your ROI calculations.

Standard ROI Formula

ROI (%) = [(Final Investment Value - Initial Cost) / Initial Cost] × 100

For example, if you purchase a stock for $10,000 and sell it for $13,500:

ROI = [($13,500 - $10,000) / $10,000] × 100 = 35%

Annualized ROI vs. Simple ROI

Simple ROI ignores the time horizon. An investment that yields 35% over 1 year is significantly better than one that yields 35% over 7 years.

To compare different investment timeframes accurately, use Annualized ROI:

Annualized ROI = [(1 + Simple ROI)^(1 / n)] - 1

Test your stock or real estate deals using our free ROI Calculator.

Calculating Real Estate ROI (Accounting for Expenses)

Real estate ROI must factor in ongoing costs, mortgage interest, property taxes, and maintenance:

Net ROI = [(Rental Income + Appreciation - Operating Expenses - Mortgage Interest) / Total Cash Invested] × 100

Calculate your portfolio returns instantly on our ROI Calculator.