ROI Calculator · Practical guide
What Is a Good Return on Investment for Stocks?
The historical benchmark is roughly 10% per year before inflation — beating that consistently puts you ahead of the market itself.
At a glance
The Benchmark: About 10% Per Year
The S&P 500 has returned an average of roughly 10% per year over the long run, or about 7% after inflation. That makes 10% annualized the natural yardstick: if your stock investments compound faster than that, you are beating the market historical average; if they lag it, a plain index fund would have served you better.
Interactive tool
ROI Calculator
Enter your own values, then compare the result with the examples below.
ROI Analysis
Judging a Real Return
Total ROI alone can mislead — you have to annualize it against the holding period. Say you put $5,000 into a stock and sold for $6,200 three years later. The total ROI is 24%, which sounds strong, but the annualized return is (6,200 ÷ 5,000)^(1/3) − 1 ≈ 7.43% — respectable, yet below the market's long-run average for the same span.
Annualized Returns in Context
| Annualized Return | How It Rates |
|---|---|
| Below 3% | Behind inflation in typical years |
| 4–6% | Modest; bond-like performance |
| 7–10% | Solid; near the historical stock average |
| 10–15% | Strong; beating the market long-run |
| Above 15% | Exceptional — rarely sustained over decades |
Two Caveats Before You Celebrate
First, use net numbers: include dividends received in your final value and subtract trading fees and taxes, or your ROI overstates reality. Second, judge returns over full market cycles. A 40% year during a bull run says little; Warren Buffett's legendary record is built on about 20% annualized sustained over decades, which shows how rare even that level is. Run your own buy and sell prices through the calculator above to see where your annualized return lands on the scale.
Frequently Asked Questions
Is a 5% return on stocks good?
For a single year it is below the historical average of about 10%; sustained over a decade it clearly lags an index fund. For short, low-risk holdings it can still beat savings accounts and inflation.
What return should I expect from index funds?
A total-market or S&P 500 index fund has historically delivered about 10% per year nominal and 7% real over long periods, though any single year can swing far above or below that average.
Does a good ROI account for risk?
A raw ROI does not. Earning 12% on a volatile single stock is a different achievement than 12% from a diversified index. Professionals compare risk-adjusted returns using measures like the Sharpe ratio.
How do dividends factor into a good return?
Dividends are part of total return. A stock up 6% in price with a 3% dividend yield returned about 9% overall — reinvested dividends also compound, so include them in your final value.