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Simple ROI: distinguish total returned from profit

Published by Navon Ventures S.A.S · October 27, 2026

Simple return on investment compares a modeled gain with the original investment. It is a percentage, not a dollar amount or an annual growth rate. The essential distinction is whether the amount received includes returned principal or represents only the gain above that principal.

Which inputs to use

Investment cost

Enter the positive original amount committed. Decide which acquisition costs belong in it and use the same definition when comparing scenarios.

Total returned

Enter the total received, including any returned principal. Do not enter only profit when the formula already subtracts the investment.

Formula and worked example

(Total returned − investment) ÷ investment × 100

With $10,000 invested and $12,000 returned in total, the gain is $2,000. Divide 2,000 by 10,000 and multiply by 100 to obtain 20%. If the total returned is $8,000 instead, the $2,000 loss produces −20% ROI.

Common interpretation mistakes

Putting a $2,000 profit into the total-returned field would model an 80% loss in the first example. Another mistake is comparing equal ROI percentages over different horizons as if the outcomes were equivalent. A 20% total return over one year and over five years are not the same annual return.

Assumptions and limits

This is a simple, nonannualized ratio. It does not model cash-flow schedules, compounding, risk or time value of money. Fees and taxes matter only if reflected consistently in the entered amounts. It cannot establish suitability or predict future returns. For hypothetical growth over time, read the separate compound-interest guide.

You can also explore Compound interest calculator.