The ROI formula
ROI (%) = (Amount returned − Amount invested) ÷ Amount invested × 100
ROI measures the size of a gain or loss relative to what you put in, which makes investments of different sizes comparable. It says nothing about time, though — that's what CAGR adds:
CAGR = (Returned ÷ Invested)^(1 ÷ years) − 1
Worked example
Invest 10,000; three years later it's worth 13,500. ROI = 3,500 ÷ 10,000 = 35%. But annualized, CAGR = (1.35)^(1/3) − 1 ≈ 10.5% per year — the honest number to compare against other opportunities, a fixed deposit, or an index fund.
Why CAGR matters more than ROI
"Doubled my money" sounds great until you learn it took 15 years — that's under 5% a year. Whenever a holding period is involved, compare CAGRs, not total ROIs. And remember to net out fees, taxes and (for property) running costs before declaring victory.