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ROI of $10,000 turning into $15,000 in 5 years

$10,000 turning into $15,000 in 5 years is a gain of $5,000, an ROI of 50%, or 8.45% a year.

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The numbers for these inputs

YearValue at a steady yearly rateGain so far
0$10,000$0
1$10,845$845
2$11,761$1,761
3$12,754$2,754
4$13,832$3,832
5$15,000$5,000

How it works

ROI is the gain divided by the amount invested: (final value - amount invested) / amount invested, shown as a percent.

ROI ignores time. To compare investments held for different periods, convert it to a yearly rate: (final / invested)^(1 / years) - 1. This is the compound annual growth rate, shown here as per-year growth.

The table assumes the growth was steady each year, which real investments are not. Costs, fees, taxes and income received along the way are not included unless you put them in the final value.

Common mistakes

  • Comparing ROI of investments held for different lengths of time.
  • Leaving out fees, taxes or extra money put in later.
  • Averaging yearly percentages instead of using the compound rate.
  • Quoting a high ROI from a very small starting amount as if it scales.

Questions

What is the ROI?

50%: a gain of $5,000 on $10,000 invested.

What is the yearly return?

8.45% a year, compounded, over 5 years. This is the figure to use when comparing with a savings rate or another investment.

How is ROI calculated?

(final value - amount invested) / amount invested x 100.

Why is the yearly rate not ROI divided by years?

Because growth compounds. 50% over 5 years is 8.45% a year, not 10%.

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