BEHIND THE NUMBERS
How this calculation works
Cost basis = initial investment + purchase fees. Net proceeds = final value + income − exit costs. Profit = net proceeds − cost basis. ROI = profit ÷ cost basis × 100. Endpoint annualised return = [(net proceeds ÷ cost basis)^(1/years) − 1] × 100, when net proceeds are non-negative.
Worked example
Total receipts £1,250 less £1,000 invested give £250 profit, a 25% ROI. The two-year endpoint equivalent is approximately 11.80% per year.
Example result: 25%
Compare profit with the full cost
Purchase fees increase the money committed; sale costs reduce money recovered. Leaving either out can make the return look better than it was.
Annualisation has a narrow purpose
It converts one start value and one end value into an equivalent yearly growth rate. For repeated deposits or withdrawals, a cash-flow method is needed.
Assumptions and rounding
- No additional contributions or withdrawals occur during the period.
- Fees are charged once as entered. Returns are before tax and inflation.
Questions about this calculator
Can ROI be negative?
Yes. A loss produces a negative ROI, and exit liabilities can make it worse than −100%.
Why is annualised ROI sometimes unavailable?
A negative net endpoint has no real-valued compound growth rate for general fractional periods. Total ROI and profit remain meaningful.