What return on investment tells you
Return on investment, or ROI, is the simplest way to measure how well an investment performed. It compares what you got back to what you put in, expressed as a percentage. A positive ROI means a gain, a negative one means a loss, and the size of the number tells you how big either was relative to your original stake.
Because ROI is a percentage rather than a raw amount, it lets you compare very different investments on equal terms. A small profit on a small stake can be a better return than a larger profit on a much larger one.
Why annualized return is the fairer number
Total ROI ignores time, and time matters. A 50 percent return is excellent in one year and mediocre across ten. That is why the calculator also shows the annualized return, the equivalent steady yearly rate that would produce the same result over your holding period.
Use the annualized figure whenever you compare investments held for different lengths of time, or when you want to measure an investment against a benchmark like a savings rate or a market average. It strips out the effect of time so you are comparing like with like.
These free tools provide general estimates for educational purposes only and are not financial, tax, or investment advice. For decisions specific to your situation, consult a qualified professional.