ROI measures how much an investment returned relative to what it cost. Add the holding period to get the annualized rate — the only fair way to compare investments held for different lengths of time.
Formula & methodology
Simple: ROI = (V − C) ÷ C × 100. Annualized: ((V ÷ C)^(1/years) − 1) × 100 — the constant yearly rate that would produce the same total growth.
Worked example
Cost 1,000, final value 1,500 → gain 500, ROI 50%. Held 3 years → annualized 14.47% — much more comparable to a yearly return than the headline 50%.
Limits
ROI ignores risk, cash-flow timing, and fees unless you include them in cost. Past figures are arithmetic, never a promise of future returns. Not investment advice.