How it works
ROI measures how much an investment gained or lost relative to what you put in. A 50% ROI means you got back your money plus half again.
Plain ROI ignores time, so a 50% gain over three years and over thirty years look the same. The annualized return (the same math as CAGR) converts it into an equivalent yearly rate, which is the fair way to compare investments held for different lengths of time.
Formula
ROI = (ending value − invested) ÷ invested × 100; annualized = (ending ÷ invested)^(1/years) − 1
Questions people ask
What is a good ROI?
It depends on risk and time. The US stock market has averaged roughly 10% a year before inflation over long periods, which is a common benchmark for annualized returns.
Should I include dividends and fees?
Yes. Count reinvested or received dividends in the ending value and add fees and commissions to the amount invested for an accurate figure.
What if I added money over time?
Simple ROI and annualized return assume one lump sum. With multiple deposits, a money-weighted return (IRR) is more accurate.