What Is a Good ROI? Understanding Return on Investment
ROI explained simply: how to calculate it, the difference between total and annualized return, and what counts as a "good" return.
The basic formula
ROI = (gain − cost) ÷ cost × 100. If you invest $1,000 and it grows to $1,300, your ROI is 30%. It is the simplest way to compare how efficiently different investments use your money.
Total vs. annualized return
A 30% total return over five years is very different from 30% in one year. Annualized return spreads the gain across the holding period so you can compare investments of different lengths fairly. The five-year example is only about 5.4% per year.
What counts as good?
- The S&P 500 has averaged roughly 10% per year (about 7% after inflation) over the long run.
- A "good" ROI beats what you could earn safely elsewhere, adjusted for the risk you took.
- Higher returns almost always mean higher risk — be skeptical of anything promising big, guaranteed returns.
Measure yours
Use our ROI Calculator for any investment, and the Stock Return Calculator when dividends are involved.
Try the calculators
ROI Calculator
Calculate return on investment (ROI) for any investment.
Stock Return Calculator
Calculate the total return and annualized return of a stock investment.
Dividend Calculator
Calculate dividend yield, income, and total returns from dividend investing.
Compound Interest Calculator
See how your money grows over time with compound interest and regular contributions.