ROI in Plain Terms
Return on Investment (ROI) measures how much you gained (or lost) relative to what you put in. It turns a raw profit figure into a percentage you can compare across very different investments.
The basic formula is: ROI = (Gain − Cost) ÷ Cost × 100. A positive ROI means profit; a negative one means a loss.
Step-by-Step Guide
Calculate ROI in four simple steps:
Find your total cost
Include everything you invested — the purchase amount plus any fees or charges.
Find your final value
This is what the investment is now worth, or what you sold it for, including any income received.
Subtract to get the gain
Final value minus total cost gives your net gain (or loss).
Divide and convert to percent
Divide the gain by the cost and multiply by 100. That percentage is your ROI.
Crunch the percentage
Use the Percentage Calculator to work out gains, losses and percentage change quickly.
Open Percentage Calculator →Comparing Returns Fairly
ROI is powerful, but use it carefully:
- Account for time: a 20% ROI over one year is very different from 20% over five — annualise to compare.
- Include all costs: fees, taxes and charges reduce your real ROI.
- Compare like with like: match risk levels, not just headline percentages.
- Watch for inflation: a positive ROI below inflation is a real-terms loss.
Frequently Asked Questions
What is a good ROI?
It depends on the risk and time frame. Compare an investment's ROI against safer alternatives and against inflation before judging it.
Does ROI account for time?
Basic ROI does not. To compare investments held for different periods, annualise the ROI.
Is this financial advice?
No. This article is for general education only. For decisions specific to your situation, speak to a SEBI-registered advisor or a qualified professional.
Disclaimer: This guide is for general educational purposes only and is not financial advice. Please consult a qualified financial advisor before making investment, tax or borrowing decisions.