MulticalcROI Calculator (Return on Investment)
Calculate percentage return to compare the efficiency of different investments.
Result
Enter investment details to calculate ROI and Profit.
Understanding Return on Investment (ROI)
Return on Investment (ROI) is the universal yardstick of profitability. Whether you're buying stocks, real estate, or starting a business, ROI answers the fundamental question: "Is this efficient use of my capital?" It normalizes returns into a simple percentage, allowing you to compare vastly different investment opportunities side-by-side.
Why ROI is King
ROI cuts through the noise of absolute numbers. A ₹10,000 profit might sound small compared to a ₹1 Lakh profit, but if the ₹10k came from a ₹20k investment (50% ROI) and the ₹1 Lakh came from a ₹10 Lakh investment (10% ROI), the smaller profit was actually the more efficient use of money.
The Formula
ROI = ((Final Value - Cost of Investment) / Cost of Investment) × 100
Example: You buy a stock for ₹100 and sell for ₹150.
Profit = ₹50.
ROI
= (50 / 100) × 100 = 50%.
ROI vs. Other Metrics: Knowing the Difference
| Metric | Definition | Best Used For | Key Limitation |
|---|---|---|---|
| ROI | Total return % over usually undefined period | Quick efficiency check, short-term trades | Ignores time duration |
| CAGR | Compound Annual Growth Rate | Long-term investments (3+ years) | Assumes smooth growth (unrealistic) |
| IRR | Internal Rate of Return | Complex cash flows (SIPs, Business) | Difficult to calculate manually |
| Absolute Return | Simple cash profit/loss | Understanding cash impact | Ignores investment size |
The "Time Trap" in ROI
A common mistake is judging an investment solely by ROI without asking "How long did this take?". A 50% ROI is amazing if it took 1 year, but terrible if it took 10 years. This table compares the same 50% Total ROI over different durations.
| Total ROI | Time Taken | Effective Annual Return (CAGR) | Verdict |
|---|---|---|---|
| 50% | 1 Year | 50.0% | 🚀 Incredible |
| 50% | 3 Years | 14.5% | ✅ Great (Stock Market Avg) |
| 50% | 5 Years | 8.4% | ⚠️ Average (Like FD) |
| 50% | 10 Years | 4.1% | ❌ Poor (Below Inflation) |
Lesson: Always annualize your ROI (convert to CAGR) for investments longer than 1 year to see the true picture.
Real-Life Scenarios
Scenario 1: The Flipper (Real Estate)
Action: Buys a fixer-upper for ₹50L, spends ₹10L on renovation, sells for ₹75L in 6 months.
Math: Cost = ₹60L. Profit = ₹15L.
ROI: (15 / 60) × 100 = 25% in 6 months.
Scenario 2: The Dividend Investor
Action: Buys ₹1L stock. Gets ₹5k dividend. Stock falls to ₹98k.
Math: Gain = ₹5k (div) - ₹2k (loss) = ₹3k.
ROI: (3k / 1L) × 100 = 3%.
Scenario 3: Business Owner
Action: Spends ₹5L on Google Ads. Generates ₹20L in Sales. Product cost was ₹10L.
Math: Net Profit = 20L - (5L Ads + 10L Cost) = ₹5L.
Marketing ROI (ROAS): (5L Profit / 5L Ads) = 100%.
Scenario 4: The Crypto Speculator
Action: Invests ₹10k in a coin. It goes to ₹50k, then crashes to ₹5k.
Math: Final Value = ₹5k. Loss = ₹5k.
ROI: (-5k / 10k) = -50%.
ROI Decision Framework
Use this 5-step checklist before making an investment based on ROI claims:
- Identify the Time Horizon: If the ROI is quoted over 5 years, divide by 5 to get a rough annual idea (or use CAGR). Don't compare a 3-year ROI directly with a 1-year FD rate.
- Check "Total" Cost: Does the "Cost of Investment" include fees, brokerage, taxes, and maintenance? Underestimating cost artificially inflates ROI.
- Verify "Net" Profit: Ensure the return is after expenses. Gross Revenue ROI implies a profit margin of 100%, which is rarely true.
- Assess Risk Adjustment: A 20% ROI in crypto is not "better" than a 10% ROI in bonds if you cannot afford to lose the principal. Higher ROI usually demands higher risk capability.
- Compare with Benchmarks: Compare your ROI against relevant benchmarks (Nifty 50 for stocks, Rental Yields for property), not just against zero.
When to rely on ROI?
Ideal Use Cases:
- Comparing short-term marketing campaigns.
- Evaluating stock trades (swing trading).
- Analyzing simple projects with one-time costs.
- Quick comparisons where duration is identical.
Limit Reliance When:
- Comparing investments with vastly different time horizons.
- Evaluating complex cash flows (like SIPs - use XIRR).
- Inflation is high (Real ROI vs Nominal ROI).
- Risk levels are incomparable.
Frequently Asked Questions
Gain = (Selling Price - Purchase Price) + (Total Rental Income collected).
Cost = Purchase Price + Stamp Duty + Renovation Costs + Maintenance + Property Taxes.
ROI = (Gain / Cost) * 100. Using a simple price-to-price comparison ignores rental yield and maintenance costs.