ROI Calculation Guide " Return on Investment Formula (2026)
ROI (Return on Investment) is the universal language of investing and business. It answers the most important question in finance: "How much did I get back for every rupee I put in?" From stocks and real estate to marketing campaigns and business ventures, calculating ROI helps you compare opportunities and make smarter decisions. This guide teaches you the formula and shows you real examples across different asset classes.
Or: ROI = (Final Value Initial Value) Initial Value — 100
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What is ROI?
Return on Investment (ROI) measures how efficiently an investment generates profit relative to its cost. A positive ROI means you earned more than you invested. A negative ROI means you lost money. ROI is expressed as a percentage and is universally comparable across different investment types and sizes.
The ROI Formula
Alternatively: ROI = Net Profit Cost of Investment — 100
Step-by-Step Examples
Example 1 " Stock Investment:
You buy 100 shares of a company at 200/share = 20,000 invested.
After 1 year, you sell at 270/share = 27,000.
ROI = (27,000 20,000) 20,000 — 100 = 35% ROI
Example 2 " Real Estate:
You buy a flat for 50 lakh. Spend 5 lakh on renovation. Sell for 70 lakh.
Total Investment = 55 lakh | Profit = 70 55 = 15 lakh
ROI = 15 55 — 100 = 27.3% ROI
Example 3 " Marketing Campaign:
Ad spend: 1,00,000. Generated revenue: 3,50,000. Cost of goods: 1,50,000.
Net Profit = 3,50,000 1,50,000 1,00,000 = 1,00,000
ROI = 1,00,000 1,00,000 — 100 = 100% ROI
Annualized ROI (CAGR)
Simple ROI doesn't account for time. A 30% return over 3 years is less impressive than 30% in 1 year. Use Annualized ROI (CAGR) to compare investments across different time horizons:
Example: 1,00,000 → 1,60,000 in 4 years
CAGR = (1.6)^(1/4) 1 = 1.1247 1 = 12.47% per year
What is a Good ROI?
- Stocks (Nifty 50 historical): 12"15% annually
- Real estate India: 8"12% annually
- → Fixed Deposit: 6.5"7.5% (2026 rates)
- Small business: 15"30% considered good
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FAQs
What is a good ROI percentage?
It depends on the investment type and time period. Generally, anything above 10% annual return is considered good for most investments. Compare to a risk-free benchmark like FD rates (6-7%) to judge whether the extra risk is worth it.
Does ROI include dividends?
For complete ROI calculation of stocks, you should include dividends in your final value. Total ROI = (Capital Gain + Dividends) Initial Investment — 100.