Step-by-Step Calculation
- Find your net profit. Final value minus initial investment.
- Divide by the initial investment.
- Multiply by 100 to express as a percentage.
Worked Example
You invest $8,000 in stocks. Three years later, you sell for $11,200.
Net profit = $11,200 − $8,000 = $3,200
ROI = ($3,200 / $8,000) × 100 = 40%
That 40% is your total return over 3 years, not per year. To annualize it fairly: (1.40)^(1/3) − 1 ≈ 11.9% per year — a much more useful number for comparing against, say, a savings account paying 4% annually.
Frequently Asked Questions
Should I include dividends in ROI calculations?
Yes — for stock investments, total return should include both price appreciation and any dividends received, otherwise you'll understate your actual ROI significantly.
What counts as a "good" ROI?
It depends entirely on the asset class and risk level — stock market ROI benchmarks differ enormously from real estate or business investment benchmarks, so always compare like with like.
