What is a good return on investment? For long-term stock-market investing, an average annual return of about 7–10% (after inflation, roughly 7%) is widely considered good. For a one-off project, a positive ROI that beats safer alternatives is the benchmark. 'Good' always depends on the risk taken and the time involved.
Return on investment (ROI) measures the gain or loss on an investment relative to its cost. Because a 50% ROI over ten years is very different from 50% in one year, always judge ROI alongside the time period and the risk involved.
ROI ranges
| ROI | Rating | What it means |
|---|---|---|
| Above 10% a year | Strong | Above long-run market averages; check the risk. |
| 7–10% a year | Good | In line with long-term equity returns. |
| 3–7% a year | Modest | Around bond/FD territory; lower risk. |
| Negative | Loss | You got back less than you put in. |
What affects your ROI
- Time period — annualise to compare fairly
- Risk — higher returns usually mean higher risk
- Costs and fees — they reduce real ROI
- Inflation — real ROI is what's left after it
- Taxes — they cut into net returns
How to improve it
- Always annualise ROI to compare investments
- Weigh return against the risk taken
- Account for fees, taxes and inflation
- Compare against a safe benchmark like an FD
Work out your own numbers — the ROI Calculator does it instantly, for free, with the formula and a worked example built in.
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