It depends entirely on the timeframe and risk. Broad stock market returns have historically averaged around 7 to 10 per cent a year before inflation, which is the usual benchmark.

What is the difference between ROI and CAGR?

ROI is total return regardless of duration. CAGR expresses it as an annual rate, which is the only fair way to compare investments held for different periods.

Should I include fees?

Yes. Excluding purchase costs, ongoing charges and tax produces a figure that flatters the investment and cannot be compared with anything else.

Yes. If the final value is below total cost, ROI is negative and represents the percentage of your capital lost.

ROI Calculator - Return on Investment | SimplyCalculators.co.uk

ROI Calculator

Return on investment expresses profit as a percentage of what it cost you. It is the quickest way to compare very different investments, provided you include every cost.

Formula

ROI = (gain − cost) ÷ cost × 100

Annualised ROI = ((final ÷ initial)^(1/years) − 1) × 100
A plain ROI ignores how long the money was tied up

£1,000 becoming £1,250: (250 ÷ 1,000) × 100 = 25% ROI

The Formula

ROI = (Final value − Total cost) ÷ Total cost × 100

Total cost means everything you put in, not just the headline purchase.

Invest £5,000 with £500 of additional costs and sell for £8,000: (8,000 − 5,500) ÷ 5,500 = 45.45%.

Leaving out that £500 would have reported 60% — a flattering figure that is simply wrong.

ROI Ignores Time

This is the measure's central weakness. A 45% return is excellent over one year and mediocre over ten, yet ROI reports the same number for both.

For anything spanning more than a year, use CAGR (compound annual growth rate), which converts total return into an annual equivalent and lets you compare holdings of different lengths.

Costs People Forget

Transaction fees on the way in and out
Ongoing costs such as maintenance, insurance or platform charges
Tax on gains, dividends or rental income
Your own time, which is a real cost in property and business investments

Quick Reference

The same 25% return looks very different once time is counted.
Invested	Returned	ROI	Over 1 year	Over 5 years
£1,000	£1,100	10%	10.0% a year	1.9% a year
£1,000	£1,250	25%	25.0% a year	4.6% a year
£1,000	£1,500	50%	50.0% a year	8.4% a year
£1,000	£2,000	100%	100.0% a year	14.9% a year

Frequently Asked Questions

What is a good ROI?: It depends entirely on the timeframe and risk. Broad stock market returns have historically averaged around 7 to 10 per cent a year before inflation, which is the usual benchmark.
What is the difference between ROI and CAGR?: ROI is total return regardless of duration. CAGR expresses it as an annual rate, which is the only fair way to compare investments held for different periods.
Should I include fees?: Yes. Excluding purchase costs, ongoing charges and tax produces a figure that flatters the investment and cannot be compared with anything else.
Can ROI be negative?: Yes. If the final value is below total cost, ROI is negative and represents the percentage of your capital lost.