ROI Calculator — Return on Investment

What is ROI?

Return on Investment (ROI) is a performance metric used to evaluate the efficiency or profitability of an investment, or to compare the efficiency of several different investments. ROI measures the return of an investment relative to the investment's cost, expressed as a percentage.

ROI is one of the most widely used financial ratios in business, investing, real estate, and marketing. It gives a quick, simple answer to the question: "For every rupee/dollar I invested, how much did I get back?"

ROI Formula

ROI Examples

Example 1: Real Estate Investment (Pakistan)

You bought a plot in DHA Karachi for PKR 25,000,000 in 2021 and sold it for PKR 38,000,000 in 2024 (3 years).

• Net Profit = 38,000,000 − 25,000,000 = PKR 13,000,000
• ROI = (13,000,000 / 25,000,000) × 100 = 52%
• Annualized ROI = (1.52^(1/3) − 1) × 100 = 15.0% per year

Example 2: Stock Investment (India)

You invested ₹50,000 in TCS shares in 2020 and sold for ₹85,000 in 2023 (3 years).

• ROI = (35,000 / 50,000) × 100 = 70%
• Annualized ROI = (1.70^(1/3) − 1) × 100 = 19.3% per year

Example 3: Business Investment

You spent PKR 500,000 on a marketing campaign. It generated PKR 2,200,000 in additional revenue. Your cost of goods for those sales was PKR 1,400,000.

• Net profit from campaign = 2,200,000 − 1,400,000 − 500,000 = PKR 300,000
• ROI = (300,000 / 500,000) × 100 = 60%

ROI vs CAGR vs IRR

ROI is simple: total profit divided by cost. It doesn't account for the time period. A 50% ROI over 1 year is very different from 50% over 10 years.

CAGR (Compound Annual Growth Rate) accounts for time by expressing growth as an annualized rate, assuming reinvestment. It's better for comparing investments held over different periods.

IRR (Internal Rate of Return) accounts for the timing of cash flows. It's the most sophisticated metric, used in venture capital, real estate, and project finance. It requires detailed cash flow projections for each period.

For simple investments (buy-hold-sell), ROI and annualized ROI are sufficient. For complex multi-period investments, use IRR.

What is a "Good" ROI?

There is no universal "good" ROI — it depends on the asset class, risk level, time period, and opportunity cost:

• Pakistan savings accounts: 15–18% (KIBOR-linked) — your baseline, risk-free
• Pakistan real estate: 8–20% per year over long term (location-dependent)
• Pakistan stock market (KSE-100): historically 10–20% per year in PKR
• India mutual funds (equity): 12–18% CAGR historically
• US S&P 500: historically ~10% per year
• Small business: 15–30%+ expected (compensates for risk and owner's time)

Always compare ROI to your risk-free rate (bank deposit rate). If an investment doesn't beat your risk-free return after accounting for inflation and risk, it may not be worth making.

Limitations of ROI

• Ignores time value of money — 50% ROI over 1 year ≠ 50% over 10 years
• Ignores risk — higher ROI may come with much higher risk
• Can be manipulated — by changing what is included in "costs" or "returns"
• Ignores liquidity — a real estate investment may have high ROI but locked capital
• Doesn't account for taxes — pre-tax ROI looks better than post-tax reality