What Counts as a "Good" ROI? Real Benchmarks for Stocks, Real Estate, and Small Business

What is a good ROI for a stock market investment?

The S&P 500 delivered an average annual return of 10.49% from 1926 through the end of 2021, and roughly 11.5% over the trailing 40 years through the end of 2025, including reinvested dividends but not adjusted for inflation. Once inflation is stripped out, the long-run real return drops to about 6.5%. Small-cap stocks have historically outrun the broad market, averaging around 12.1% annually from 1928 to 2024 — a reminder that "the stock market" isn't one single benchmark, but a range depending on which slice you hold.

What is a good ROI for real estate?

Real estate has historically returned roughly 8-12% annually when rental income and property appreciation are both counted, with one widely cited annualized growth figure around 8.6% over a recent multi-year stretch — consistently below the S&P 500's return over the same period. Because a rental property's return blends two very different components — recurring cash flow from rent after expenses, and one-time appreciation realized only at sale — the two should be tracked separately. A property with weak appreciation but strong positive cash flow can still be a good investment, and vice versa.

How does ROI differ from annualized ROI?

Total ROI is the simple percentage gain or loss across an entire holding period: (amount returned − amount invested) ÷ amount invested. It does not account for how long the money was invested, which makes it misleading on its own for comparing different holding periods. Annualized ROI corrects for this by compounding the total return down to a yearly rate: (1 + ROI)^1/years − 1.

All three rows show the same 50% total ROI, but the annualized figure reveals a very different investment: doubling that gain in 1 year is an outstanding result, while taking 10 years to get there barely clears the return on a savings account.

What counts as a good ROI for a small business?

There is no single agreed-upon small-business ROI benchmark the way there is for public markets — returns vary enormously by industry, capital intensity, and risk. Small-cap stocks, a rough public-market stand-in for smaller, higher-growth companies, have averaged about 12.1% annually from 1928 to 2024, above the broad S&P 500 average. Because a private small business carries far more concentration risk and far less liquidity than a diversified small-cap index — you can't sell 5% of your business on a public exchange tomorrow — it should generally be expected to clear a meaningfully higher return than 12.1% to justify that added risk.

Is a 4-6% ROI good or bad?

4-6% sits in line with investment-grade bonds and high-yield savings accounts, not a stretch return for stocks or real estate. Whether that's good depends entirely on the risk taken to earn it. A 4-5% return from a federally insured savings account is an excellent risk-adjusted outcome, since the principal is effectively guaranteed. That same 4-6% from a leveraged real estate deal or a small business — both of which can lose principal — would be a weak result relative to the risk involved.

Why do ROI benchmarks vary so much by investment type?

ROI benchmarks track risk. This relationship, often called the risk-return tradeoff, means assets with more volatility, less liquidity, or more potential for total loss generally need to offer investors a higher expected return to be worth holding. That's why savings accounts and bonds cluster around 4-6%, diversified public stocks sit around 10-12%, and concentrated, illiquid, or leveraged positions — a single rental property, a small business, a startup investment — typically need to clear a higher bar before the extra risk makes sense.

• Match the benchmark to the asset class — don't judge a bond fund against S&P 500 returns, or a rental property against a savings account.
• Always annualize multi-year returns before comparing investments held for different lengths of time.
• Check the inflation-adjusted number for any long-term comparison — a nominal return that trails inflation is a real loss even if the dollar figure grew.

Should you compare your ROI to inflation?

Yes. A nominal ROI that doesn't outpace inflation represents a loss of purchasing power even though the account balance went up. The S&P 500's roughly 10-11.5% long-run nominal average falls to about 6.5% once inflation is factored in — the more meaningful figure for judging whether an investment actually built wealth, rather than simply kept pace with rising prices. Use our Inflation Calculator to convert any nominal return into today's purchasing power.

Frequently asked questions about ROI benchmarks

What is a good ROI for a stock market investment?

The S&P 500 has averaged roughly 10.49% annually from 1926 through 2021, and about 11.5% over the trailing 40 years through 2025, including reinvested dividends but not adjusted for inflation. Adjusted for inflation, the long-run real return is closer to 6.5%. A single year matching or beating the 10-11.5% nominal range is in line with the historical stock market average; a multi-decade portfolio should be judged against the ~6.5% real return.

What is a good ROI for real estate?

Real estate has historically returned roughly 8-12% annually when both rental income and property appreciation are included, with one commonly cited annualized growth figure around 8.6% over a recent multi-year period — consistently trailing the S&P 500 over the same stretch. Because real estate returns combine cash flow (rent minus expenses) and appreciation, a rental property's ROI should be evaluated on both components separately, not just resale value.

How does ROI differ from annualized ROI?

ROI is the total percentage gain or loss over the entire holding period: (amount returned minus amount invested) divided by amount invested. Annualized ROI converts that total into a compounded yearly rate using the formula (1 + ROI)^(1/years) minus 1, which is the only way to fairly compare investments held for different lengths of time — a 50% total ROI over 5 years is a very different result than 50% over 1 year.

What counts as a good ROI for a small business?

There's no single small-business ROI benchmark the way there is for public markets, since returns vary enormously by industry and risk level, but small-cap stocks — a rough public-market proxy for smaller, higher-growth companies — have averaged about 12.1% annually from 1928 to 2024, above the broad S&P 500 average. A private small business, which carries far less liquidity and diversification than a small-cap stock index, should generally target a higher expected return than that to compensate for the added risk.

Is a 4-6% ROI good or bad?

4-6% is roughly in line with investment-grade bonds and high-yield savings accounts, not a stretch return for stocks or real estate. Whether it's "good" depends entirely on the risk taken to get it: 4-6% from a federally insured savings account is an excellent risk-adjusted return since the principal is effectively guaranteed, while 4-6% from a leveraged real estate deal or a small business would be a weak outcome given the risk involved.

Why do ROI benchmarks vary so much by investment type?

ROI benchmarks track risk: assets with more volatility, less liquidity, or more potential for total loss generally need to offer a higher expected return to attract investors, a relationship often called the risk-return tradeoff. That's why savings accounts and bonds cluster around 4-6%, diversified public stocks around 10-12%, and concentrated, illiquid, or leveraged investments like a single rental property or small business often need to clear a higher bar to justify the added risk.

Should you compare your ROI to inflation?

Yes — a nominal ROI that doesn't beat inflation represents a real loss of purchasing power even though the dollar amount grew. The S&P 500's roughly 10-11.5% long-run nominal average drops to about 6.5% once inflation is factored in, which is the more meaningful number for judging whether an investment actually built wealth rather than just kept pace with rising prices. Check your own numbers with the ROI Calculator.

Data sources: Fidelity: What Is the S&P 500 and Stock Market Average Return? and SparkRental: Historical Stock Market Return Since 1926 (S&P 500 nominal and inflation-adjusted returns, small-cap returns 1928-2024, real estate annualized growth). ROI and annualized ROI math independently verified against our ROI Calculator. Analysis by the staff at accurate.software.