A good ROI depends on the investment type. Stocks historically average 7%–10% annually. Real estate often delivers 8%–12% total returns (cash flow + appreciation). A good business investment might target 15%–25%+ annually. CDs and bonds yield 4%–6% in 2026. Anything above your risk-free alternative (Treasury bonds) is your risk premium.

What is the average stock market ROI?

The S&P 500 has returned approximately 10% annually before inflation (about 7% after inflation) over the last century. But that's an average — individual years range from -37% to +54%. Long holding periods (10+ years) are essential to realize historical averages.

How do you calculate ROI on rental property?

Rental property ROI combines annual cash flow and appreciation. The formula: (Annual Rent - Expenses - Mortgage Payments + Appreciation) ÷ Total Cash Invested × 100. A property generating $400/month cash flow on a $50,000 down payment plus $10,000 appreciation annually yields roughly 33.6% ROI. Use an investment calculator to model exact scenarios.

How do you calculate annualized ROI over multiple years?

Use the CAGR formula: (Ending Value ÷ Starting Value)^(1/Years) - 1. For example, if $10,000 grows to $19,672 in 10 years: (19,672/10,000)^(1/10) - 1 = 0.07 or 7% annualized. Simple ROI would say 96.7%, but annualized ROI tells you the compound annual growth rate, which is more useful for comparing investments.

How to Calculate ROI on Any Investment: A No-Nonsense Guide

The ROI formula is (Gain − Cost) ÷ Cost × 100. Invest $10,000, sell for $14,000, and your ROI is 40%. Simple — but real-world ROI gets tricky when you add time horizons, cash flows, and taxes. Here's how to calculate it right for every investment type, plus real benchmarks.

The Basic ROI Formula

ROI = (Final Value − Initial Cost) ÷ Initial Cost × 100

That's it. But ROI alone doesn't account for time, risk, taxes, or ongoing cash flows. For multi-year investments, you need annualized ROI (CAGR) to compare apples to apples.

ROI by Investment Type: Real Examples

Stocks

You buy $10,000 of an S&P 500 index fund. After 5 years it's worth $15,000 and paid $800 in dividends.

Simple ROI: ($15,800 − $10,000) ÷ $10,000 × 100 = 58%

Annualized ROI: ($15,800/$10,000)^(1/5) − 1 = 9.6%

Rental Property

You put $50,000 down on a $250,000 rental. Annual rent is $24,000, mortgage/tax/insurance is $18,000, and the property appreciates $10,000/year.

Annual cash flow: $6,000

Annual appreciation: $10,000

Annualized ROI: ($16,000 ÷ $50,000) × 100 = 32%

Real estate ROI looks high because of leverage — your $50K controls a $250K asset. But leverage also amplifies risk if property values drop.

Small Business

You invest $25,000 to start a side business. In year 3, you sell it for $60,000 after drawing $15,000 in total owner distributions.

Simple ROI: ($75,000 − $25,000) ÷ $25,000 × 100 = 200%

Annualized ROI: 44.2%

CD (Certificate of Deposit)

You buy a $10,000 12-month CD at 5.0% APY.

Simple ROI: $500 ÷ $10,000 × 100 = 5.0%

Risk: Near-zero (FDIC insured)

Typical ROI by Investment Type (Annualized)

Investment Typical Annual ROI Risk Level

S&P 500 (long-term) 7%–10% Moderate-High

Rental Property 15%–30% (leveraged) Moderate

Small Business 15%–50%+ High

Corporate Bonds 5%–7% Low-Moderate

CDs (2026) 4%–5% Very Low

High-Yield Savings 4%–4.5% Very Low

What ROI Doesn't Tell You

Time. A 50% ROI over 1 year is phenomenal. Over 20 years, it's 2% annualized — worse than a savings account. Always annualize multi-year ROIs.
Risk. A crypto investment showing 300% ROI looks great until you compare it to a 10% S&P 500 return that came with dramatically less volatility.
Taxes. ROI is pre-tax. A CD earning 5% in a 24% tax bracket nets 3.8% after taxes. Tax-advantaged accounts (IRA, 401k) preserve more of your return.
Liquidity. Rental property ROI is often high, but you can't sell a bathroom to pay for an emergency. Factor in how quickly you can access your money.

How to Calculate Annualized ROI (CAGR)

For investments held more than one year, use the CAGR formula:

CAGR = (Ending Value ÷ Starting Value)^(1 ÷ Years) − 1

Example: $10,000 grows to $19,672 over 10 years → (19,672/10,000)^(0.1) − 1 = 0.07 → 7% annualized. The simple ROI is 96.7%, but annualized tells the real story: 7% per year compounded.

Calculate Your ROI With Real Numbers

Stop doing mental math. Use our investment calculator to project returns for stocks, real estate, or any investment with different contribution levels, time horizons, and expected rates. See exactly how much your money grows — with and without ongoing contributions.

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