Question 1

What is a good ROI percentage?

Accepted Answer

A 'good' ROI depends heavily on context. Stock market investments average ~10%/year. Real estate typically returns 8%–12% annually. Business investments vary widely. For comparison purposes, use the annualized ROI this calculator provides, not just the simple percentage, especially for multi-year investments.

Question 2

What's the difference between simple ROI and annualized ROI?

Accepted Answer

Simple ROI = (Net Profit / Cost) × 100. Annualized ROI adjusts for the time period using compound interest math, making investments of different durations comparable. A 50% ROI over 5 years is only about 8.4%/year annualized — very different from 50% in one year.

Question 3

How do I compare investments with different time horizons?

Accepted Answer

Use annualized ROI (also called CAGR — Compound Annual Growth Rate). This calculator shows annualized ROI automatically. You can also compare up to 4 scenarios side by side to find the best investment for your situation.

Question 4

What's the difference between ROI and IRR?

Accepted Answer

ROI is a simple ratio measuring return relative to cost. IRR (Internal Rate of Return) accounts for the timing of cash flows — important when a project has multiple inflows/outflows over time. For simple investments with one upfront cost and one final value, ROI and IRR will give similar results.

Question 5

Does this calculator account for inflation?

Accepted Answer

This calculator shows nominal ROI (before inflation). To get real ROI, subtract the inflation rate from your annualized ROI. For example, a 9% annualized ROI with 3% inflation gives you a real return of about 6%. For long-term investments, real ROI is the more meaningful number.

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