Question 1

What is ROI on a stock?

Accepted Answer

Return on investment (ROI) is the profit from a stock trade expressed as a percentage of the amount you invested. If you invested $2,000 and made $400 in profit, your ROI is 20%. ROI lets you compare trades or investments of very different sizes on equal footing — a critical habit for anyone building a diversified portfolio rather than judging each trade only by its dollar outcome. It's one of the most widely used metrics in personal investing and corporate finance alike.

Question 2

How do I calculate return on investment for stocks?

Accepted Answer

Divide net profit by total cost and multiply by 100. Net profit = (sell price × shares − sell fees) − (buy price × shares + buy fees). Total cost = buy price × shares + buy fees. A $600 profit on a $3,000 total cost is 20% ROI. Always include fees for a true net figure, and be explicit about the time period involved — a 20% ROI over one month and a 20% ROI over five years are dramatically different investments.

Question 3

What's the difference between ROI and CAGR?

Accepted Answer

ROI is a total return over the entire holding period, no matter how long that was. CAGR (compound annual growth rate) annualizes that return, expressing it as a per-year rate as if the investment compounded evenly. A 60% ROI over 3 years is roughly a 17% CAGR; the same 60% over 10 years is only about 4.8% CAGR. Use ROI for a snapshot of a completed trade; use CAGR when comparing holdings with different time horizons or benchmarking against annual market returns.

Question 4

What's a good ROI on stock investments?

Accepted Answer

The S&P 500 has delivered a long-term average of roughly 10% annualized including dividends, so anything sustainably above that on an annual basis is genuinely strong. On a per-trade basis, ROI depends heavily on time and risk: a 30% ROI on a speculative biotech held for six months is not comparable to a 30% ROI on a broad index ETF held for three years. When comparing, look at annualized ROI (CAGR), the volatility taken, and the result vs a simple index benchmark over the same window.

Question 5

Does ROI account for dividends and taxes?

Accepted Answer

By default, this ROI calculation focuses on the price return of a single trade — dividends and taxes are excluded. For dividend-inclusive lifetime returns on a long-term hold, use the Historical Investment Calculator. Taxes depend on your holding period (short vs long-term capital gains), income bracket, and account type. Two trades with identical pre-tax ROI can leave very different amounts in your pocket after tax, especially if one is short-term in a taxable account and the other is long-term or inside an IRA.

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