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Average Return
Average investment return
Enter annual returns for each year (leave 0 to skip):
How It Works
Free average return calculator to compute the average annual return of an investment over a specified period.
The average return is a measure of an investment's performance over time. There are two common ways to calculate it: the arithmetic average and the geometric average. The arithmetic average simply adds up all the annual returns and divides by the number of years, while the geometric average accounts for compounding effects.
The geometric average return (also called the compounded annual growth rate or CAGR) is generally more accurate for investment analysis because it reflects the actual growth of an investment over multiple periods. The arithmetic average tends to overstate returns when there is volatility.
For example, if an investment gains 50% one year and loses 50% the next, the arithmetic average return is 0%, but the geometric average return is −13.4% (the actual compounded loss). This highlights the importance of using the appropriate average when evaluating investment performance.
Results
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Quick Tips
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