Question 1

How do you calculate ROI?

Accepted Answer

ROI (Return on Investment) is calculated as: ROI = (Final Value - Initial Investment) / Initial Investment x 100. For example, if you invested $10,000 and it grew to $15,000, your ROI is ($15,000 - $10,000) / $10,000 x 100 = 50%.

Question 2

What is annualized ROI and why does it matter?

Accepted Answer

Annualized ROI converts your total return into a yearly rate, making it easier to compare investments held for different periods. A 50% return over 5 years is about 8.4% annualized, while a 50% return over 2 years is about 22.5% annualized. The formula is: Annualized ROI = (Final/Initial)^(1/years) - 1.

Question 3

What is a good ROI?

Accepted Answer

A good ROI depends on the investment type and risk level. The S&P 500 has historically returned about 10% per year. A savings account yields 4-5% currently. Real estate averages 8-12%. Any investment should at minimum beat inflation (~3%) to preserve purchasing power. Higher returns typically come with higher risk.

Investment Type	Historical Annual Return
S&P 500 (stocks)	~10% (7% after inflation)
Bonds (US Treasury)	~4-5%
Real estate (REITs)	~8-12%
High-yield savings	~4-5%
Gold	~7-8% (long-term)
Bitcoin (since 2015)	~50%+ (high volatility)

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