What ROI means
Return on investment shows how much you gained or lost relative to what you put in: ROI = (final value − initial investment) ÷ initial investment × 100. Putting in Rs 500,000 and ending with Rs 650,000 gives an ROI of 30%. Because ROI ignores time, a 30% return over two years is not the same as 30% over ten years, which is why this calculator also shows the annualised figure.
Annualised return
The annualised return (CAGR) is the constant yearly rate that would produce the same final value: (final ÷ initial)1/years − 1. Use it to compare a plot, a business, a mutual fund or a savings certificate on equal terms.
Using it well
- Include every cost: fees, taxes, maintenance and commissions.
- Compare against inflation. A 10% return with 12% inflation reduces buying power.
- Remember that past returns do not guarantee future results.
This tool is for education and is not investment advice. Compare it with the cost of borrowing using the loan EMI calculator.
Worked example
You invest Rs 10,000 and after five years it is worth Rs 15,000, with annual fees of 1%. The simple ROI is (15,000 - 10,000) / 10,000 = 50%. The compound annual growth rate is (1.5)^(1/5) - 1, about 8.4% a year. If inflation averaged 8%, your real gain is close to zero, which is why comparing returns with inflation matters in Pakistan.
Limits of ROI
- It ignores risk: a 20% return from a volatile asset is not the same as 20% from a savings certificate.
- It ignores timing and cash flows between start and end.
- It depends on what you count as cost: fees, taxes, repairs and your own time.
Comparing opportunities
To compare a plot, a small business and a savings scheme, use the annualised return and then ask which risks you can tolerate. Check borrowing costs with the loan EMI calculator, estimate margins with the profit calculator and work out percentage changes with the percentage calculator. Zakat on investments is covered in the zakat calculator, and exchange-rate effects on foreign investments can be checked with the currency converter.
Frequently asked questions
What is a good ROI?
It depends on risk, time and alternatives. Compare any investment with inflation and with low-risk options like government savings schemes.
What is the difference between ROI and annualised return?
ROI is the total gain; annualised return converts it to a yearly rate so different time periods can be compared.
Does ROI include tax?
Only if you include tax in your costs. Enter net figures for a realistic result.
Is this financial advice?
No, it is an educational calculation.