A three-year investment
$10,000 growing to $14,000 over 3 years is a 40% total ROI, or about 11.87% annualized.
ROI calculator
This is an estimate for information only. It is not financial or investment advice.
Result
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How it works
The raw ROI figure treats the whole holding period as one block, which makes a 40% return over one year look identical to a 40% return over ten. Annualizing spreads that same total return evenly across the years, the same way a compound interest rate would, so the two cases end up with very different annualized figures.
A negative gain (a loss) produces a negative ROI, and the same annualization still applies.
Formulas used
ROI
ROI = (Gain − Cost) ÷ Cost
Annualized ROI
Annualized = (1 + ROI)^(1 ÷ years) − 1
Worked examples
The same total return, faster
The same 40% total return achieved in just 1 year annualizes to exactly 40% — much stronger than spreading it over 3 years.
Assumptions and limits
- The cost is paid once at the start and the gain is received once at the end.
- No taxes or fees are subtracted from the gain.
Frequently asked questions
What counts as "gain" in this calculator?
The total value you received back, including any proceeds from selling the investment — not just the profit. The calculator subtracts the cost for you.
Why is annualized ROI lower than total ROI for anything over a year?
Because compounding a smaller annual rate over multiple years still reaches the same total — the annualized figure is always the smaller building block that compounds up to the total ROI.
Can ROI be negative?
Yes — enter a gain lower than the cost to see a negative ROI and a negative annualized rate, representing a loss.
Does this account for cash flows received along the way?
No — this compares a single cost against a single final gain. For an investment with several cash flows over time, an internal-rate-of-return calculation is more accurate.
Updated
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