Question 1

What is ROI?

Accepted Answer

ROI (Return on Investment) is a percentage that measures how much profit or loss an investment generated relative to its cost. A 50% ROI means you earned 50 cents for every dollar invested. It is one of the most widely used metrics for comparing the performance of different investments.

Question 2

What is the ROI formula?

Accepted Answer

ROI = (Net Profit ÷ Cost of Investment) × 100, where Net Profit = Final Value − Initial Investment. For example, if you invested $10,000 and received $15,000, net profit is $5,000 and ROI = (5,000 ÷ 10,000) × 100 = 50%.

Question 3

What is CAGR and how does it differ from ROI?

Accepted Answer

CAGR (Compound Annual Growth Rate) is the annualised version of ROI. While ROI shows total return over the entire holding period, CAGR shows the equivalent steady annual rate. A 60% ROI over 5 years equals a CAGR of approximately 9.9% per year. CAGR is essential for comparing investments held for different time periods.

Question 4

What is a good ROI?

Accepted Answer

A "good" ROI depends on the asset class, time horizon, and risk taken. As a rough benchmark: the S&P 500 has returned ~10% per year historically; South African equities (JSE All Share) ~12% per year; property ~7% per year; and cash/savings accounts ~5% per year. Any annualised return that meaningfully exceeds inflation (typically 3–4% in developed markets) represents a real gain in purchasing power.

Question 5

Can ROI be negative?

Accepted Answer

Yes. A negative ROI means your investment lost value — the final amount is less than what you put in. For example, investing $10,000 and recovering only $7,000 gives an ROI of −30%. This calculator shows negative ROI in red and estimates the time required to recover from the loss at a 7% p.a. benchmark rate.

Benchmark	Avg annual return	Notes
S&P 500 (historical avg)	~10% / yr	US large-cap stocks, ~1950–present
JSE All Share	~12% / yr	South African equities
SA Property	~7% / yr	Residential real estate
Cash / Savings	~5% / yr	Money market / savings account

ROI Calculator

How it works

How it works

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