Return on investment (ROI) measures how much an investment earned relative to what it cost. This guide gives the formulas for total and annualized ROI, worked examples for stocks, GICs, a rental property and a business, and the mistakes that make ROI figures misleading. It is one of the calculation guides on our investing basics hub. Growth over time with regular contributions is a different calculation, covered by the investment calculator; for rental properties specifically, see the rental property calculator.
ROI Formula
ROI = (Net Profit ÷ Total Investment Cost) × 100
Annualized ROI = (Final Value ÷ Initial Investment)^(1 ÷ Years) − 1
Basic ROI Examples
| Investment | Cost | Return | Net Profit | ROI | Period | Annualized |
|---|---|---|---|---|---|---|
| Stock portfolio | $50,000 | $75,000 | $25,000 | 50% | 5 years | 8.4% |
| GIC | $10,000 | $11,400 | $1,400 | 14% | 3 years | 4.5% |
| Rental property | $100,000 (down payment) | $150,000 (equity + income) | $50,000 | 50% | 5 years | 8.4% |
| Business | $25,000 | $40,000 | $15,000 | 60% | 2 years | 26.5% |
Real Estate ROI Calculation
Simple ROI
| Component | Amount |
|---|---|
| Purchase price | $500,000 |
| Down payment | $100,000 |
| Closing costs | $12,000 |
| Renovations | $15,000 |
| Total investment | $127,000 |
| Sale price (5 years later) | $625,000 |
| Mortgage balance remaining | $375,000 |
| Selling costs (5%) | $31,250 |
| Net proceeds | $218,750 |
| Net profit | $91,750 |
| Total ROI | 72.2% |
| Annualized ROI | 11.5% |
Rental Property ROI (Cash-on-Cash)
| Component | Monthly | Annual |
|---|---|---|
| Rental income | $2,200 | $26,400 |
| Mortgage payment | -$1,400 | -$16,800 |
| Property tax | -$250 | -$3,000 |
| Insurance | -$100 | -$1,200 |
| Maintenance (5%) | -$110 | -$1,320 |
| Vacancy (5%) | -$110 | -$1,320 |
| Net cash flow | $230 | $2,760 |
| Down payment + closing costs | $112,000 | |
| Cash-on-cash return | 2.5% |
Cash-on-cash measures annual cash flow relative to cash invested. Total ROI also includes appreciation and mortgage paydown.
Stock Market ROI
| Benchmark | Annual return | $10,000 after 10 years |
|---|---|---|
| S&P 500, 1928 to 2025 average (US dollars, dividends reinvested) | ~10% | $25,937 |
| Canadian equities, planners’ 2026 long-term assumption | 6.3% | $18,422 |
| Fixed income, planners’ 2026 long-term assumption | 3.2% | $13,702 |
| Short-term savings, planners’ 2026 long-term assumption | 2.4% | $12,677 |
| Inflation, planners’ 2026 long-term assumption | 2.1% | $12,310 needed just to keep pace |
The S&P 500 figure is the compounded annual total return calculated by NYU Stern’s Aswath Damodaran; the 2026 assumptions are from FP Canada and the Institute of Financial Planning’s Projection Assumption Guidelines and are before fees. The investment calculator covers these assumptions in more detail.
ROI by Investment Type
| Investment | Typical Annual ROI | Risk Level | Liquidity |
|---|---|---|---|
| HISA | Moves with the Bank of Canada rate; see current HISA rates | Very low | Instant |
| GIC (1-year) | Fixed when you buy; see current GIC rates | Very low | Locked until maturity |
| Bond ETF | About 3.2% (long-term planning assumption, before fees) | Low-moderate | High |
| Balanced ETF (VBAL) | Between the bond and stock assumptions, depending on the mix | Moderate | High |
| Equity ETF (VEQT) | About 6.3% to 7.5% depending on the region (long-term planning assumptions, before fees) | Moderate-high | High |
| Rental property | Varies widely with price, rent, costs and leverage | Moderate-high | Low |
| Individual stocks | -100% to 100%+ | High | High |
| Starting a business | -100% to 1000%+ | Very high | Very low |
Common ROI Mistakes
| Mistake | Why It Matters | Correct Approach |
|---|---|---|
| Ignoring fees and costs | Commissions, MER, closing costs reduce real ROI | Include ALL costs in calculation |
| Not annualizing | 50% over 10 years ≠ 50% over 2 years | Always compare annualized returns |
| Ignoring taxes | Pre-tax and after-tax ROI can differ significantly | Calculate after-tax returns |
| Ignoring inflation | 7% nominal return with 3% inflation = 4% real return | Use real (inflation-adjusted) returns |
| Comparing different time periods | Bull market years inflate ROI | Use long-term averages (10+ years) |
| Survivorship bias | Only looking at winners | Consider average investor returns |
After-Tax ROI in Canada
| Account | Gross Return | Tax Treatment | After-Tax ROI (example) |
|---|---|---|---|
| TFSA | 7% | Tax-free | 7.0% |
| RRSP | 7% | Deductible contribution, taxed on withdrawal | 7.0% if your tax rate at withdrawal equals your rate when you contributed; lower if it is higher, higher if it is lower |
| Non-registered (capital gains) | 7% | 50% inclusion rate | ~5.95% if gains are realized every year; higher if they are deferred |
| Non-registered (interest) | 4% | Fully taxable | ~2.8% |
After-tax ROI depends on your marginal tax rate. The example assumes a 30% marginal rate. The RRSP row works because the refund from the deduction, if invested, offsets the tax paid on withdrawal.
Related Resources
Sources
The figures and rules on this page come from these sources, last checked against them on September 23, 2026. How we check facts.
- Canada Revenue Agency: Capital Gains – 2025
- FP Canada: 2026 PROJECTION ASSUMPTION GUIDELINES
- stern.nyu.edu: Data table