ROI calculator.

Reading the result

Total return is the dollar gain or loss. ROI % is that return divided by your original investment. Annualized ROI smooths the return over the holding period - the only number you should use when comparing investments held for different lengths of time.

What ROI measures, and what it quietly leaves out

ROI is the simplest performance measure there is: gain divided by cost. Its simplicity is why it is everywhere, and also why it is misread. Four things are missing from it, and each one can reverse a decision.

• Time. A 30% ROI over nine months and a 30% ROI over nine years are the same number and completely different outcomes. This is why the annualised figure, not the raw percentage, is the one to compare.
• Risk. ROI has no volatility term. A 9% result from a GIC and a 9% result from a single stock rank identically, which is obviously wrong.
• Cash flow timing. ROI treats one dollar in and one dollar out. If you contributed along the way, or took distributions, the simple calculation overstates or understates your actual result depending on when the money moved.
• Tax. ROI is pre-tax by default, and in Canada the after-tax number depends heavily on the account and on the kind of income.

The Canadian after-tax version

Two investments with identical ROI can leave you with materially different amounts of money, because Canada taxes the three forms of investment income at three different effective rates.

Capital gains are the lightest: only part of a realised gain is included in income, and nothing is taxable at all until you sell, so gains compound untouched in the meantime. Canadian dividends come next, taxed through the gross-up-and-credit mechanism that partially refunds the corporate tax already paid: see the dividend calculator for how that works. Interest is the heaviest, taxed as ordinary income at your full marginal rate, every year, whether you spent it or not.

The account wrapper then multiplies the effect. Inside a TFSA nothing is taxed at all and ROI is ROI. Inside an RRSP the whole withdrawal is taxed as income later, so the comparison depends on your marginal rate then versus now. In a non-registered account, the tax drag lands annually on distributions and reduces the compounding base every year, which is a much bigger effect over decades than most people credit.

The practical implication is that ROI is a fair comparison tool only between investments held in the same account earning the same kind of income. Across account types it is a starting point, not an answer.

ROI, CAGR, IRR and MOIC

Four measures, four questions:

• ROI: total gain relative to cost. No time dimension. Best for a quick read on a completed, single-cash-flow investment.
• CAGR: the constant annual rate that would produce the same result. Use it whenever holding periods differ; the CAGR calculator does exactly this.
• IRR: a money-weighted rate that handles contributions and withdrawals at the times they actually happened. This is the honest measure of your return on a portfolio you have been adding to.
• MOIC: a multiple rather than a percentage, standard in private equity and venture. A 3× MOIC is a 200% ROI stated differently, which is worth knowing when reading a fund report.

The common error is comparing a time-weighted figure to a money-weighted one. A fund can report a strong CAGR while an investor who bought in at the top has a poor IRR, and neither number is wrong: they are measuring the fund and the investor respectively.

Simple ROI versus annualised ROI: worked examples

ROI = (final value − initial investment) ÷ initial investment. Annualised ROI = (final value ÷ initial investment)^1/years − 1. The two numbers tell different stories:

The third and fourth rows have the same 30% ROI, but one took nine years and the other nine months. Annualising the nine-month result assumes you could repeat it at the same rate, which is rarely realistic, so treat that figure as a way of comparing speed, not as a forecast.

Putting every cost into the calculation

An honest ROI includes the cost of getting in and out. Suppose you buy $10,000 of shares and pay a $75 commission, then sell them for $13,000 and pay another $75. Your total cost is $10,075 and your net proceeds are $12,925, so the net gain is $2,850 and ROI is 2,850 ÷ 10,075 = 28.29%, not the 30% the prices alone suggest. For property or a business, add holding costs such as taxes, insurance, maintenance and the fees on any borrowed money.

When ROI is the right tool, and when it is not

ROI is a good fit for a single purchase and a single sale, like a flip, an equipment purchase or a one-off marketing spend. It is a poor fit for a portfolio you keep adding to, because it cannot tell when the money went in. For that, use a money-weighted measure such as IRR or a time-weighted return. If money was borrowed, compare the ROI with the after-tax interest rate, since a return below the borrowing cost destroys value even though the percentage is positive.

Common mistakes

• Dividing by the final value instead of the starting cost, which understates ROI.
• Comparing a two-year ROI with a five-year ROI without annualising.
• Leaving out dividends, interest or distributions received along the way, which are part of the gain.
• Forgetting that tax is charged on realised gains: Canada’s CRA asks you to report taxable capital gains on the return for the year in which you sold or disposed of the property.

Sources

• Investor.gov (U.S. SEC), Compound Interest: the definition of compound interest behind annualised returns (retrieved 2026-10).
• Investor.gov (U.S. SEC), Compound Interest Calculator: a regulator-run tool for checking growth over time (retrieved 2026-10).
• Canada Revenue Agency, Line 12700 - Taxable capital gains: taxable capital gains are reported when you sell or dispose of property (retrieved 2026-10).