Frequently Asked Questions
What is a good ROI for investments in the USA?
Good ROI depends on risk and asset class. Stock market: 10-15% annual return is excellent. Real estate: 8-12% including appreciation and rental yield. Bonds: 4-6%. Any return consistently above 10% annually beats most professional fund managers. Risk-adjusted returns matter more than raw ROI numbers.
What is CAGR vs total ROI?
Total ROI of 61% over 5 years sounds great but the CAGR (Compound Annual Growth Rate) is only 10%. CAGR normalizes returns to a yearly rate, making it easy to compare investments of different durations. Always compare investments by CAGR, not total percentage, to avoid misleading comparisons.
How does inflation affect my real return?
Real Return = Nominal Return - Inflation Rate. If your investment returns 7% and inflation is 3%, your real purchasing power gain is only 4%. A savings account at 2% with 3% inflation means you're losing purchasing power. Always consider inflation-adjusted (real) returns for long-term planning.