What is the ROI?

Return on Investment or ROI shows you the return from your investments. It helps you to choose the best investment across different investment options. You may evaluate the investment based on your financial goals and risk tolerance. You could also gauge the cost of your investment and look for hidden charges that could eat up your returns. The return on investment is usually expressed as a percentage. In simple terms, the return on investment is a financial ratio that helps you determine the benefit of your investment against the costs. You may calculate the return on investment using the formula: ROI = Net Profit / Cost of the investment * 100 If you are an investor, the ROI shows you the profitability of your investments. If you invest your money in mutual funds, the return on investment shows you the gain from your mutual fund schemes. ROI may be positive or negative. If the return on investment is negative, you are actually losing money on the investment. You must pick an investment that may offer you the maximum return over a period.

What is an ROI Calculator?

The ROI calculator is a simulation that helps you gauge the profitability of your investments. You may use the ROI calculator to determine the return from investments across various periods. The ROI Calculator consists of a formula box, where you enter the initial amount invested, the amount returned, and the investment period. The ROI Calculator shows you the total gain on investment. It also shows you the absolute return on investment, annualised return on investment, and the CAGR or the compounded annual growth rate.

How does ROI Calculators work?

You must understand the difference between the absolute return on investment and the annualised return on investment. Absolute returns can be calculated using the formula: (The end value of the investment – Initial value of the investment)/ Initial value of the investment You can convert the return to a percentage by multiplying by 100 For example, you have an initial investment of Rs 25,000 that has grown to Rs 30,000. You may calculate the absolute return as : 30,000 – 25,000 / 25,000 = 20%. The absolute return measures the performance of the stock market for periods of less than one year. If you want to determine the performance of an investment over different holding periods, you use the annualised return on investment. Annualised return can be calculated with the following formula: End Value – Beginning Value/Beginning Value * 100 * (1/holding period of the investment) For example, you had bought a house for 30 lakh in January 2010 and sold it for Rs 50 lakh in January 2020. You have the initial value of the investment as Rs 30 lakh and the final value of the investment as Rs 50 lakh. You have held the investment for five years. The holding period is five years. Annualised Return = 50,00,000 – 30,00,000 / 30,00,000 * 100 * (1/5) Annualised Return = 13.33%. You may annualise the absolute return by multiplying by the factor:

• 365 / number of days the investment was held.
• 12 / holding period of investment in months.
• 1 / holding period of the investment in years.

How to use the ClearTax ROI Calculators?

The ClearTax ROI Calculator shows you the return on your investments. To use the ClearTax ROI Calculator:

• You must enter the amount you have invested.
• Enter the amount returned.
• You then enter the holding period of the investment.
• The ClearTax ROI Calculator shows you the gain on your investment. It also shows you the absolute return on your investment and the annualised return on the investment.

Benefits of ClearTax ROI Calculator

• The ClearTax ROI Calculator shows you the absolute return and the annualised return on the investment. You may calculate the return on your investment across different holding periods.
• The calculator helps you to pick the right investment based on your financial goals and risk tolerance.
• The calculator helps you select the best mutual funds based on the performance over different periods.
• You can measure the worth of the investment against the benchmark.
• You may measure the profit from the investment against the cost of the investment.