Return on Investment (ROI) measures the efficiency of an investment. Total ROI is the raw percentage gain. Annualized return normalizes that gain over time so you can compare investments of different durations.
When to use which
- Total ROI: for single-event comparisons (did I make money on this?)
- Annualized ROI: to compare a 3-year 30% gain vs a 5-year 40% gain fairly