What's a Good ROI? Benchmarks by Investment Type
A 20% ROI sounds great — until you learn it took ten years. Here's how to judge whether your returns are actually good, with benchmarks for every major asset class.
The short answer
"Good" depends entirely on what you're comparing against. A 5% annual return is excellent for cash savings, mediocre for stocks, and poor for an active business. Always compare like-for-like.
As a rough rule of thumb for passive investments (where you don't put in ongoing effort):
- 2–4% annualised — about inflation. You're treading water, not getting richer.
- 5–7% annualised — solid. Beats inflation meaningfully.
- 7–10% annualised — excellent. Roughly the long-term stock market average.
- Above 10% annualised — outstanding, but usually requires either higher risk or active effort.
Benchmarks by investment type
Stocks & equity funds
The S&P 500 has averaged roughly 10% per year before inflation over the past century, or about 7% after inflation. UK equity funds have historically returned slightly less (currency and sector mix differences). Individual stocks vary enormously — most underperform the index over time, which is why index funds are the default recommendation for most investors.
Good benchmark: 7–10% annualised over 10+ years.
Property
UK property has averaged about 5–6% annual capital growth over the long term, plus 3–5% rental yield if let. Combined, that's roughly 8–11% gross — but subtract mortgage interest, maintenance, voids, stamp duty, and agent fees, and net ROI is often 4–7% annualised. Leverage (a mortgage) magnifies both gains and losses.
Good benchmark: 5–8% annualised net after all costs. Use the mortgage calculator to model your financing cost.
Cash savings
UK easy-access savings accounts have averaged 1–3% over the past decade, with peaks around 5% in high-rate periods. Cash ISAs are similar but tax-free. Inflation averages 2–3%, so real returns are often close to zero.
Good benchmark: match or beat the Bank of England base rate. Anything above inflation is fine for an emergency fund; don't expect to grow wealth in cash.
Bonds & gilts
UK government gilts have returned 3–5% annualised historically. Investment-grade corporate bonds slightly more. Bonds are lower risk than stocks but also lower return — they're for stabilising a portfolio, not growing it.
Good benchmark: 3–5% annualised for high-quality bonds.
Side hustles & small businesses
This is where ROI numbers get wild. A weekend reselling operation might do 200% ROI on a small outlay. But you're trading time for money, so the comparison to passive investing isn't apples-to-apples.
Good benchmark: for a side hustle to be worth doing, aim for at least 20–30% ROI on costs and an hourly rate that beats your day job. Otherwise the time is better spent elsewhere.
The catch with averages
Average returns hide volatility. The stock market's "10% average" includes years of +30% and -20%. A property investment that returns 8% a year for 5 years might still leave you down if you're forced to sell in a downturn. The longer you hold, the more reliably averages apply — which is why every personal finance book says "time in the market beats timing the market."
Use the ROI calculator with a holding period to see the annualised return, which is the only fair way to compare investments held over different timeframes.
Frequently asked questions
What is considered a good ROI?
For passive investments, 7–10% annual ROI is considered good — that's roughly the long-term stock market average. Anything above 10% annualised is excellent. For active investments like a side hustle, aim for at least 20–30% to justify the time spent.
What is the average ROI on stocks?
The S&P 500 has averaged about 10% annual returns before inflation, or about 7% after inflation, over long periods. Individual years vary widely — returns can be +30% or -20% in any given year.
Is 5% a good ROI?
It depends on the investment. For a savings account, 5% is excellent. For stocks, 5% annualised is below average. For property after costs, 5% annualised is solid. Context matters — compare against a benchmark for the same asset class.
Bottom line
"Good ROI" only means something when you compare against a benchmark for the same asset class and adjust for time. A 50% return over 10 years (4.1% annualised) is worse than a 20% return over 2 years (9.5% annualised). Use the ROI calculator with your holding period to get the annualised number — that's the one that actually lets you compare.