How Do I Manually Calculate the Return on an Investment?

Return on investment, or ROI, is a measure of the success of your investment, whether it's for a business or a personal venture. For instance, if you place your cash into an account that bears interest, it's helpful to analyze your return on the investment. Some ROI calculators allow you to do this calculation quickly, but if you want, you can calculate the ROI manually.

Step 1

Determine the total amount of the benefit you've received as a result of the investment. For instance, if you put your money into a savings account that had a balance of $2,500 at maturity, that is the figure you should use here.

Step 2

Recall the total amount you initially spent on the investment. In the example of the savings account, say the total amount you initially deposited out of your own funds was $2,000.

Step 3

Subtract the total amount you invested from the total benefit to get your net profit. In this case, the result is $500.

Step 4

Determine your tax rate on your investment profit. For this example, use a tax rate of 33 percent or .33. Multiply that by the net profit to get your tax due, then subtract the total tax from the profit to get your net profit after taxes. In this example, multiply 500 by .33, which equals $165. Then subtract $165 from $500 to get the net profit after taxes of $335.

Step 5

Divide the net profit by the amount you initially invested to get the return on investment. In this case, the ROI is 335/2000, which equals 0.1675, or 16.75 percent.

the nest