The ROI calculator measures what an investment gives back relative to what it cost — and how long until the original outlay is recovered.
The formula
ROI = (Total gain − Cost) ÷ Cost, expressed as a percentage. Payback period = Cost ÷ Annual return. ROI tells you the size of the win; payback tells you how long your money is at risk — two different questions that investors weigh together.
Worked example
A $50,000 investment returning $15,000 a year, held five years: total return $75,000, so ROI = (75,000 − 50,000) ÷ 50,000 = 50%, and payback = 50,000 ÷ 15,000 = 3.3 years. After year four, everything is profit.
How to read the result
The honest limitation: simple ROI ignores when money arrives — 50% over five years is very different from 50% over two, yet ROI shows the same figure. For time-adjusted comparisons, express it as an annual rate with the CAGR calculator, or discount the flows properly in the DCF calculator. ROI also counts only what you measure — remember costs like maintenance, fees and your own time.
What is a good ROI?
Context decides: the stock market has historically returned ~7-10% a year; a business project might demand 20%+ to justify its risk; real estate investors often target 8-12% annually.
What's the difference between ROI and CAGR?
ROI is the total return over the whole period; CAGR converts it into a smoothed annual rate, which makes different time horizons comparable.
Should ROI include ongoing costs?
Yes — subtract maintenance, fees, taxes and other running costs from the gain, or the ROI is flattering fiction.
What is a payback period?
The time until cumulative returns equal the original cost. Shorter is safer: less time for the world to change while your capital is exposed.