Calculate return on investment, annualized ROI, and payback period for any investment — stocks, real estate, business projects, or crypto.
| Scenario | Total Return | Annualized | Verdict |
|---|
ROI (Return on Investment) measures the profitability of an investment as a percentage of the initial cost. It's the single most important metric for comparing investment opportunities.
The basic formula is:
ROI = (Net Profit ÷ Investment Cost) × 100%
Example: Invest $10,000 → sell for $16,000 after 3 years. Net Profit = $6,000. ROI = ($6,000 ÷ $10,000) × 100 = 60%
Simple ROI doesn't account for time. A 50% return over 10 years is much worse than a 50% return over 2 years. Annualized ROI (CAGR — Compound Annual Growth Rate) adjusts for the holding period.
CAGR = (Final Value ÷ Initial Investment)1/years − 1
Example: $10,000 → $17,000 in 5 years. Simple ROI = 70%. Annualized = [(17,000/10,000)1/5 − 1] = 11.2%/year
It depends on the asset class, risk level, and your alternatives. Here are benchmarks for 2025:
| Investment | Typical Annualized ROI | Risk Level |
|---|---|---|
| Savings Account | 0.01%–4.5% | None |
| Government Bonds | 3%–5% | Very Low |
| Corporate Bonds | 4%–7% | Low-Medium |
| S&P 500 Index Fund | 7%–10% (historical) | Medium |
| Real Estate (Rental) | 8%–12% | Medium |
| Individual Stocks | −100% to +∞ | High |
| Crypto | −90% to +∞ | Very High |
The risk-free benchmark: The US 10-year Treasury yield (~4.5% in 2025) is considered "risk-free." Any investment with more risk should beat this, or it's not worth it.
The payback period tells you how long it takes to recover your initial investment. Shorter = less risk, faster access to your money.
Formula: Payback Period = Initial Investment ÷ Annual Cash Flow
Example: Buy a rental for $200,000, collect $1,500/month rent, $6,000/year expenses. Net cash flow = $12,000/year. Payback = $200,000 ÷ $12,000 = 16.7 years. This is why investors use mortgages to shorten the payback period.
Real estate ROI is more complex because of leverage, taxes, and expenses. The two main metrics:
Example: $300,000 property, 25% down ($75,000), $2,000/month rent, $1,200/month costs. Cash flow = $9,600/year. Cash-on-Cash ROI = $9,600 ÷ $75,000 = 12.8%. Leverage amplifies returns — but also amplifies losses.