The ROI calculator works in two tabs. Compound growth takes a starting amount, a monthly deposit, the yearly return you expect and a period, and shows what the money grows to year by year, split into your deposits and accumulated profit. ROI and CAGR takes what you put in and what came back, and gives the total return, the annualised return and, if you add the yearly cash flow, the payback period. Amounts are in Saudi riyals, and every figure is an estimate at a return you choose.
How compound return works
With a compound return, each month's profit is calculated on the whole balance, including profit from earlier months. The balance grows slowly at first and faster later, which is the bend you see in the curve, and each new deposit starts growing from the month it goes in. Compound interest is the same calculation: in Saudi Arabia most Sharia-compliant savings products and sukuk call the return an "expected profit" rather than interest, but the compounding maths is identical.
FV = P × (1 + r/12)12n + PMT × ((1 + r/12)12n − 1) ÷ (r/12)
Compound growth year by year
Under the result is a yearly table showing total deposits to the end of each year, accumulated profit and the balance. In the first example the balance is SAR 16,784.56 after one year and SAR 48,373.52 after five. Profit in year ten alone is larger than the first three years' profit combined, which is compounding at work. Download the table as an Excel file to change the return or the deposit and watch the effect; the cells hold formulas, not fixed numbers.
How to calculate return on investment (ROI)
Return on investment is net profit as a percentage of the amount invested. It suits a project, a piece of equipment or a marketing campaign: what you spent, and how much came back as extra revenue or savings.
ROI = (Final value − Cost) ÷ Cost × 100
Annualised return (CAGR) and payback period
A 20% return over three years is not 20% a year. The compound annual growth rate (CAGR) is the steady yearly rate that would take the amount to the same final value; in the example it is 6.27% a year. Use it to compare investments of different lengths.
CAGR = (Final ÷ Cost)1/n − 1 · Payback = Cost ÷ Annual cash flow
The payback period is how long the yearly cash flow takes to return the amount invested. In the example SAR 24,000 comes back each year, so SAR 60,000 is recovered in 2.5 years. Switch on Advanced options in the ROI tab to enter the yearly cash flow.
Investment calculator: what it assumes and what it does not tell you
The calculator assumes the same return every year; real returns swing and can be negative in some years. It leaves out fees, zakat on the balance, and inflation, which the General Authority for Statistics in the Kingdom publishes every month, so for a figure closer to reality subtract the yearly fee rate from the expected return before you enter it. It does the arithmetic only; whether a particular investment product suits you is a question for a licensed adviser.
Common mistakes
- Dividing the total return by the number of years to get a yearly return. 20% over three years is 6.27% a year compounded, not 6.67%.
- Entering a monthly return in the yearly return field.
- Working out ROI without the running costs of the investment, such as maintenance and subscriptions.
- Treating the projected value as a guaranteed amount when making a financial decision.
What to do with the result
Try three returns, cautious, middle and optimistic, and compare the balances to see how wide the range is. Download the result as a PDF with the table and chart, or as an Excel file to change the assumptions yourself, or copy a link that carries your numbers to share it.