How It Works

ROI measures how much money you made (or lost) on an investment as a percentage of your initial investment. It’s the most basic way to evaluate investment performance.

Formula

ROI = (Current Value - Initial Investment) / Initial Investment × 100

In Google Sheets:

=(B2-A2)/A2*100

Where A2 is initial investment and B2 is current value.

Example

Stock Investment:

Initial Investment: $5,000
Current Value: $6,500

Formula: =(6500-5000)/5000*100

Result: 30% ROI

Common Scenarios

Simple Stock Gain

Bought at $50/share, now worth $65/share:

=(65-50)/50*100

Result: 30% ROI

Investment with Dividends

$10,000 invested, now worth $11,200, plus $400 dividends received:

=(11200+400-10000)/10000*100

Result: 16% total return

Loss Calculation

$8,000 invested, now worth $6,800:

=(6800-8000)/8000*100

Result: -15% ROI (loss)

Variations

As Decimal (Not Percentage)

=(current-initial)/initial

Returns 0.30 instead of 30

Annualized ROI (Simple)

=ROI/years

If you earned 30% over 3 years: 30/3 = 10% per year (simple average)

Including Transaction Costs

=(current - initial - fees) / (initial + fees) * 100

Pro Tips

ROI doesn’t account for time - 30% in 1 year is better than 30% in 5 years
Use CAGR for multi-year investments to get annualized returns
Include ALL costs - fees, commissions, taxes affect true return
Compare apples to apples - ROI on different investments should cover same time period

ROI Comparison Table

Investment	Initial	Current	ROI
Stock A	$5,000	$6,500	30%
Stock B	$3,000	$3,600	20%
Bond Fund	$10,000	$10,800	8%
Savings	$2,000	$2,080	4%

Limitations

ROI is simple but limited:

Doesn’t show risk
Ignores time value of money
Doesn’t account for cash flow timing
Can be misleading for leveraged investments

For more sophisticated analysis, use IRR or CAGR.