What Is a Good ROI?
How to calculate return on investment, what counts as a “good” ROI, and why annualized return — not raw ROI — is the number that lets you compare investments fairly.
The short version
- ROI = (gain − cost) ÷ cost × 100. It’s the percentage return on what you put in.
- Raw ROI ignores time — a 50% return is great in one year and mediocre over ten.
- For a fair comparison, convert to an annualized return (CAGR).
- As a benchmark, the stock market has returned roughly 10% a year long-term (about 7% after inflation).
Return on investment — ROI — is the most common way to measure whether something you put money into paid off. It’s a single percentage that tells you how much you gained relative to what you spent. It’s easy to calculate, which is exactly why it’s also easy to misuse. Here’s how to get it right.
The ROI formula
ROI = (gain − cost) ÷ cost × 100
Take what you got back, subtract what you put in, divide by what you put in, and multiply by 100 for a percentage.
Say you invest $10,000 and later sell for $13,000. Your gain is $3,000, so your ROI is $3,000 ÷ $10,000 × 100 = 30%. Simple. The number captures the whole return in one figure, which is why it’s used for everything from stocks to a kitchen remodel to a marketing campaign.
What counts as a “good” ROI?
“Good” only means something next to a benchmark. The most common yardstick is the stock market: the S&P 500 has returned roughly 10% a year on average over the long run — about 7% after inflation. So a broadly diversified return that beats inflation and lands near double digits annually is generally considered solid. Anything well below inflation is actually losing you buying power, even if the raw number is positive.
What’s “good” also depends on risk. A near-guaranteed 5% from a Treasury or CD is excellent for money you can’t afford to lose; the same 5% from a risky startup bet is poor pay for the risk. Always judge ROI against both a benchmark and the risk you took to get it.
The trap: ROI ignores time
Here’s where raw ROI misleads. A 50% ROI sounds fantastic — but 50% earned over one year is spectacular, while the same 50% over ten years is mediocre. ROI alone says nothing about how long your money was tied up, so it can’t fairly compare investments held for different lengths of time.
| Total ROI | Held for | Annualized return |
|---|---|---|
| 50% | 1 year | ~50% |
| 50% | 5 years | ~8.4% |
| 50% | 10 years | ~4.1% |
The fix: annualized return
To compare fairly, convert ROI into an annualized return — the compound annual growth rate, or CAGR. It restates any total return as a steady yearly rate, so a one-year win and a ten-year hold sit on the same scale. When someone quotes an eye-popping ROI, ask over how many years; the annualized figure is the honest one.
Calculate your return
Enter what you put in and what you got back to see your ROI instantly.
Try the calculator
ROI CalculatorCalculate return on investment (ROI). Enter what you invested and what it is worth to see your net profit, ROI percentage, and annualized return.Held the investment for more than a year? Convert it to an annualized return so you can compare it apples-to-apples with anything else.
Sources
This article is for general education and is not financial, tax, or legal advice. Figures reflect published 2026 IRS and SSA amounts as of the date above; verify current limits with the linked sources or a qualified professional before acting.
About the author
David Miles is the founder of FigureMoney and builds independent, source-backed personal-finance tools across the Modern Site Builders network. Every calculator and guide cites the IRS, SSA, or primary research behind its numbers.
Calculators in this guide
ROI Calculator
Calculate return on investment (ROI). Enter what you invested and what it is worth to see your net profit, ROI percentage, and annualized return.
CAGR Calculator
Calculate the compound annual growth rate (CAGR) of an investment from its beginning value, ending value, and the number of years.
Compound Interest Calculator
Free compound interest calculator. See how savings and investments grow with an initial amount, regular contributions, interest rate, and compounding frequency.
Keep reading
What Is the Average Stock Market Return?
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