ROI is a metric used to evaluate the profitability of an investment. It measures the amount of return on an investment, i.e., how much money a particular investment has earned. This is often used in finance and business to determine if an investment is worthwhile or to compare it with other opportunities.

How is return on investment calculated? It is expressed as a percentage, where the amount earned is divided with the amount invested and multiplied by 100:

(amount returned – amount invested) / amount invested  * 100

For example, if you bought 100 Nvidia stocks for $100, your total investment amount would be 100 * $100 = $10,000. Suppose you sold those 100 stocks at $150 per stock. The total amount returned would be $15,000. This means your profit is $15,000 – $10,000 = $5,000. Total ROI would be ($15,000 – $10,000) / $10,000 * 100 = 50%.

ROI is a popular metric because it offers a simple way to determine the profitability of an investment. However, it does not paint the entire picture, as time is not taken into account. If two investments make the same profit, we would prefer the one that does so in a shorter time frame. This is why we also calculate annualized ROI, using a slightly different formula:

This calculator calculates both the total ROI and annualized ROI.