Finance
ROI Explained: More Than Just a Percentage
Morecalcs Team 2026-07-08· 6 min
How to compute return on investment — and why annualizing it changes the story.
The formula
ROI = (Gain − Cost) / Cost × 100. A $10,000 investment worth $12,500 has a 25% ROI.
Why annualized ROI matters
That 25% over 5 years is only about 4.56% per year. Over 6 months it's about 56%. Time changes the meaning of the same headline.
Costs you forget
Fees, taxes, opportunity cost, and time invested. A "50% ROI" flip that took a year of weekends may underpay minimum wage.
Compare apples to apples
Always report ROI as CAGR (compound annual growth rate) when comparing multi-year investments.
Advertisement · in-content
More in Finance
How Mortgage Calculations Really Work
The amortization formula in plain English, with a worked example.
Compound Interest, Visualized
Why the third decade beats the first two combined.
A Practical Retirement Planning Guide
How much you actually need — and how to get there without stress.
APR vs APY: The Difference That Costs You Money
APR is what you're quoted. APY is what you actually pay or earn.