It depends on the investment type and risk level. Stocks historically return 7-10% annually. Real estate often yields 8-12%. A good ROI should exceed the risk-free rate plus a suitable risk premium.

Does ROI include all costs?

It should, but often does not. Include purchase price, transaction fees, maintenance costs, taxes, and opportunity cost. Forgetting hidden costs is the most common mistake when calculating ROI.

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GuidesMay 10, 20265 min read

What Is ROI? How to Calculate Return on Investment

ROI is the simplest, most universal metric for evaluating whether an investment is worth it. Learn the calculation method and real-world applications.

Guide overview

Whether you are buying stocks, real estate, or starting a business, ROI is the most basic metric for judging if the money was well spent.

ROI is the simplest, most universal metric for evaluating whether an investment is worth it. Learn the calculation method and real-world applications.

Key points from the source guide

The source guide defines ROI as gain minus cost, divided by cost, expressed as a percentage.

It applies ROI to stocks, real estate, business projects, and marketing decisions.

It warns that ROI ignores time and risk unless you add more context.

Try the related Toolars calculators

This migrated guide links to these Toolars tools: roi-calculator, compound-interest.

Tools mentioned in this article

Frequently asked questions

What is a good ROI?: It depends on the investment type and risk level. Stocks historically return 7-10% annually. Real estate often yields 8-12%. A good ROI should exceed the risk-free rate plus a suitable risk premium.
Does ROI include all costs?: It should, but often does not. Include purchase price, transaction fees, maintenance costs, taxes, and opportunity cost. Forgetting hidden costs is the most common mistake when calculating ROI.