Total ROI · Annualized CAGR · Net profit · Benchmark comparison · Any investment · 2026
How to Calculate ROI
Return on Investment (ROI) measures how much you gained or lost relative to what you invested. The basic formula is: ROI = (Final Value − Initial Investment) ÷ Initial Investment × 100. A 50% ROI means you gained $50 for every $100 invested. But total ROI alone doesn't account for time — that's where CAGR comes in.
ROI vs CAGR — What's the Difference?
- ROI (Return on Investment) — Total percentage gain from start to finish. Doesn't account for how long you held the investment. An 80% ROI over 2 years is very different from 80% over 10 years.
- CAGR (Compound Annual Growth Rate) — The smoothed annualized rate that would produce the same final value. Allows fair comparison between investments held for different time periods. Formula: CAGR = (Final/Initial)^(1/years) − 1
- Example: $10,000 → $18,000 over 5 years = 80% total ROI but only 12.5% CAGR annually.
What Is a Good ROI?
- Above 10% annualized — Excellent. Outperforming the S&P 500 historical average.
- 7–10% annualized — Good. Matching or slightly below long-term stock market returns.
- 4–7% annualized — Fair. Beating inflation but not growing wealth significantly in real terms.
- Below 4% annualized — Poor for equity investments. Better returns available in risk-free instruments.
- Negative ROI — You lost money. Evaluate why before reinvesting.
Frequently Asked Questions
Why does my ROI look good but CAGR looks low?
+
Total ROI compounds over time — a 100% total ROI sounds impressive but if it took 10 years, that's only 7.2% CAGR annually. CAGR normalizes for time and is the more meaningful number for comparing investments. Always compare CAGR when evaluating investments held for different durations.
Should I include fees and taxes in my ROI calculation?
+
Yes — for real-world decision making, always calculate net ROI after fees and taxes. A 15% gross return on a stock might only be 11% after capital gains tax and brokerage fees. Using the "With Fees & Tax" mode in this calculator gives you the true net return on your investment.
What is a good ROI for real estate?
+
For rental properties, a common benchmark is the 1% rule (monthly rent ≥ 1% of purchase price) and a cash-on-cash return of 8–12%. Total ROI including appreciation has historically been 8–12% annually in strong markets. However, real estate ROI varies dramatically by location, leverage used, and management costs. Always calculate after mortgage payments, property tax, insurance, maintenance, and vacancy.