What is return on investment (ROI)?
In one line: Return on investment (ROI) is your gain or loss divided by what you put in, shown as a percent.
A simple example
You buy shares for $2,000. Later you sell them for $2,300.
Gain: $2,300 − $2,000 = $300. ROI: $300 ÷ $2,000 = 0.15, or 15%.
Now add costs. Say you paid $10 in fees each way, $20 total. Real gain: $280. Real ROI: $280 ÷ $2,000 = 14%.
If you'd sold for $1,800 instead, ROI would be −$200 ÷ $2,000 = −10%. ROI can be negative.
The formula
ROI = (what you got back − what you put in) ÷ what you put in × 100.
The percent change calculator does the same math for any two numbers.
Why it matters
ROI lets you compare things of different sizes. A $300 gain on $2,000 (15%) and a $300 gain on $10,000 (3%) are very different results.
It also keeps you honest. Counting every cost, like commissions, spreads and subscriptions, shows what really happened.
A common mistake
Ignoring time. A 15% ROI over 1 year and a 15% ROI over 5 years are not the same. Spread over 5 years, it works out to under 3% a year.
That's what CAGR fixes: it turns a total return into a yearly rate. Try it in the CAGR calculator.
In trading, a lot of people track results in units of risk instead of percent. A gain of 2 times what you risked reads the same on any account size. See the risk-reward ratio guide.
Questions
What is a good ROI?
There's no single answer. It depends on the time span, the risk taken and what else you could have done with the money, like holding an index fund.
Does ROI include dividends?
Only if you add them. Counting dividends as part of what you got back gives you something close to Total return.
Can ROI be more than 100%?
Yes. Turning $1,000 into $2,500 is a 150% ROI. Losses stop at −100%, when the money is all gone (unless leverage is used).
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