Frequently Asked Questions
How do I calculate ROI?
Return on investment (ROI) = (final value − initial investment) ÷ initial investment. A $10,000 investment now worth $13,500 has a 35% total ROI. To compare across time horizons, annualize: annualized return = (final ÷ initial)^(1/years) − 1. A 35% return over 5 years is about 6.2% annualized.
What is a good annual investment return?
Long-term historical averages: US stocks (S&P 500) ~10% nominal / ~7% real, international stocks ~7%–8%, US bonds ~4%–5%, REITs ~9%–10%, cash/T-bills ~3%. A diversified 60/40 stock/bond portfolio has averaged about 8% nominal historically. Anything above 12% over a multi-year period is excellent and should not be expected to persist.
How does inflation affect investment returns?
Inflation erodes purchasing power, so the meaningful return is real (inflation-adjusted), not nominal. With 3% inflation, a 7% nominal return is only about 4% real. Over decades, the gap is huge: $100,000 growing at 7% for 30 years is $762,000 nominal but only $315,000 in today's dollars at 3% inflation.
What is the difference between simple and time-weighted return?
Simple return measures total gain divided by initial investment. Time-weighted return adjusts for the timing of contributions and withdrawals, isolating the manager's skill from your contribution behavior. For comparing funds or strategies, time-weighted (or money-weighted IRR) is more accurate; for personal performance tracking, simple ROI is fine.
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Financial Disclaimer: Estimates only. Not financial advice.
This calculator provides estimates for informational purposes only. Actual financial outcomes depend on market conditions, personal circumstances, and decisions. Not financial advice. Consult a certified financial planner before making financial decisions affecting your future.