What is annualized ROI (CAGR)?

Annualized ROI, or Compound Annual Growth Rate (CAGR), tells you what consistent annual growth rate would produce the same total return over a given period. Formula: CAGR = (Final Value / Initial Value)^(1/years) − 1.

Context matters. For stock market investments, the S&P 500 averages roughly 10% annually before inflation. For real estate, 8–12% annualized is considered strong. For business investments, ROI varies widely by industry and risk level.

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ROI Calculator

Calculate your return on investment, net profit, annualized return (CAGR), and investment multiple for any asset — stocks, real estate, business, or any other investment.

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ROI Formula Explained

Return on Investment measures the gain or loss from an investment relative to its cost. The formula is: ROI (%) = ((Final Value − Initial Investment) ÷ Initial Investment) × 100.

For example, investing $10,000 and getting back $13,500 yields an ROI of 35%. ROI doesn't account for time by itself — a 35% ROI over 1 year is very different from 35% over 10 years. That's why annualized ROI (CAGR) matters: it converts any ROI over any time period into a comparable annual rate.

CAGR formula: (Final Value ÷ Initial Value)^(1 ÷ years) − 1. A $10,000 investment that grows to $13,500 over 3 years has a CAGR of 10.5% per year.

What Is a Good ROI?

Asset Class	Typical Annualized ROI	Risk Level
S&P 500 (stocks)	~10% before inflation, ~7% real	Medium–High
Real estate (rental property)	8–12% total return	Medium
US Treasury bonds	4–5% (2024–2025)	Very Low
High-yield savings account	4–5% (2024–2025)	Very Low
Small business	15–30%+ (highly variable)	High
Angel / venture investing	25%+ (most fail)	Very High

Frequently Asked Questions

What is the difference between ROI and CAGR?: ROI measures total return over the entire investment period, regardless of how long it was. CAGR (annualized ROI) converts that total return into a consistent annual growth rate, making it possible to compare investments held for different lengths of time.
Can ROI be negative?: Yes. A negative ROI means you lost money on the investment. For example, investing $10,000 and getting back $7,000 is an ROI of −30%.
Does ROI account for dividends or rental income?: The basic ROI formula uses total return: include dividends or rental income in your final value. So if you invested $10,000 in a stock, received $500 in dividends, and sold for $12,000, your final value is $12,500 for an ROI of 25%.
Why use annualized ROI instead of total ROI?: A 100% ROI sounds impressive, but if it took 20 years, that's only ~3.5% per year — worse than most savings accounts. Annualizing lets you compare returns across different time horizons on a level playing field.