Question 1

What is ROI?

Accepted Answer

ROI, or Return on Investment, measures how much profit (or loss) you made relative to the amount you invested. It is expressed as a percentage: ROI = (Final Value - Initial Investment) / Initial Investment x 100. For example, if you invested ₹1,00,000 and got back ₹1,50,000, your ROI is 50%.

Question 2

What is the difference between absolute and annualised ROI?

Accepted Answer

Absolute ROI tells you the total percentage gain over the entire holding period, regardless of how long you held the investment. Annualised ROI (also called CAGR) normalises that gain to a per-year rate, making it easy to compare investments held for different durations. A 50% absolute ROI over 10 years is far less impressive than the same gain over 2 years.

Question 3

How is annualised ROI calculated?

Accepted Answer

Annualised ROI uses the CAGR formula: (Final Value / Initial Investment) ^ (1 / Years) - 1, expressed as a percentage. For example, ₹1,00,000 growing to ₹2,00,000 over 5 years gives a CAGR of about 14.87% per year, even though the absolute ROI is 100%.

Question 4

What is a good ROI on investments in India?

Accepted Answer

It depends on the asset class. Savings accounts and FDs typically return 4 to 7% per year. Equity mutual funds and index funds have historically delivered 10 to 14% CAGR over long periods. Real estate varies widely by location. A rough benchmark: if your annualised ROI beats inflation (around 5 to 6%) comfortably and exceeds a risk-free FD rate, it is considered a reasonable return.

ROI Calculator

Frequently asked questions

ROI Calculator

Frequently asked questions