Investment Parameters
₹ 1,00,000
₹
₹ 1,50,000
₹
3 Years
Years
ROI Summary
Absolute ROI
50.00%
Annualized ROI
14.47%
Net Profit
₹ 50,000
Investment Benchmark Comparison
Beaten
Beaten
Beaten
Beaten
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Worked Example: Investment ROI
Suppose you buy a real estate property for ,000, pay ,000 in transaction costs, and sell it after 3 years for ,000:
- Initial Cost (Investment) = ,000
- Final value (Return) = ,000
- Net Profit = ,000 - ,000 = ,000
- Absolute ROI = (,000 / ,000) × 100 = 23.81%
- Annualized ROI (CAGR) = 7.38%
The investment yields a total return on investment of 23.81% (7.38% per year).
Return on Investment Calculation Formulas
The mathematical representation of absolute and annualized capital growth rates is outlined as follows:
1. Absolute ROI Formula
Absolute ROI = [ ( Vfinal - Vinitial ) / Vinitial ] × 100
2. Annualized ROI (Compounded Annual Yield)
Annualized ROI = [ ( Vfinal / Vinitial ) ( 1 / t ) - 1 ] × 100
Where:
- Vinitial = Invested capital base
- Vfinal = Returned maturity amount
- t = Investment tenure in years
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Frequently Asked Questions
A "good" ROI is relative to the investment asset type and its risk profile. Historically, a yearly return of 7% to 10% is considered decent for diversified index funds, while fixed bank deposits typically yield between 5% and 7.5%.
Yes, if the returned or current asset value is less than the original invested capital, the ROI will be negative, representing a capital loss.