Question 1

What is ROI (Return on Investment)?

Accepted Answer

ROI measures the percentage return on your investment. Formula: ((Final Value - Initial Investment) / Initial Investment) × 100. A 50% ROI means you made half of your initial investment as profit. Positive ROI = profit, negative ROI = loss.

Question 2

What is CAGR (Compound Annual Growth Rate)?

Accepted Answer

CAGR shows your average annual return if gains were compounded yearly. It lets you compare investments held for different time periods. A 5-year investment that doubled had 100% total ROI but only ~14.9% CAGR (annualized).

Question 3

Why is annualized return important?

Accepted Answer

Annualized return (CAGR) lets you compare investments of different durations fairly. A 20% return over 2 years (9.5% annual) is better than 20% over 4 years (4.7% annual). CAGR shows the true time-adjusted performance.

Question 4

How do I calculate ROI on stocks?

Accepted Answer

Use your total purchase cost as initial investment and current value (or sale price) as final value. Include any dividends received in your final value. This calculator will show your total ROI and annualized return.

Question 5

What is a good ROI?

Accepted Answer

A 'good' ROI depends on the investment type and risk. Stock market historically averages 7-10% annually. Real estate often targets 8-12%. Safer investments like bonds return 3-5%. Higher potential returns usually mean higher risk.