Financial Calculators
Average Return Calculator
Calculate average annual return using arithmetic or geometric mean.
What is the Average Return Calculator & How does it work?
The Average Return Calculator helps investors determine the average annual growth rate of their investments over a specified period. This tool supports both arithmetic and geometric means, providing insights into year-by-year performance.For arithmetic mean, add up all yearly returns and divide by the number of years. For geometric mean (CAGR), multiply all yearly returns (in decimal form) and take the nth root, where n is the number of years.
Arithmetic Mean = frac{sum_{i=1}^{n} R_i}{n}
R = yearly return, n = number of years
Geometric Mean (CAGR) = left(prod_{i=1}^{n} (1 + R_i)right)^{frac{1}{n}} – 1
R = yearly return, n = number of years
Parameters
USD
USD
years
Arithmetic Mean Return
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Geometric Mean Return (CAGR)
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Frequently Asked Questions
What is the difference between arithmetic and geometric means in this calculator?
Arithmetic mean adds up all yearly returns and divides by the number of years, while geometric mean (CAGR) multiplies yearly returns and takes the nth root.
How do I use this Average Return Calculator?
Enter your yearly investment returns over a specified period. Choose between arithmetic or geometric mean to calculate the average annual growth rate.
What does CAGR stand for in this calculator?
CAGR stands for Compound Annual Growth Rate, which is calculated using the geometric mean.
Can I use this calculator for investments other than stocks?
Yes, you can use it for any type of investment where you have yearly return data.
Why should I choose geometric mean over arithmetic mean?
Geometric mean is more suitable for calculating average returns over time because it accounts for compounding effects, providing a more accurate picture of growth.
What if my investment had negative returns in some years?
Include the negative returns as they are. The calculator will handle them appropriately when computing the geometric mean.
How many years of data do I need to use this calculator?
You can use any number of years for which you have return data, but at least two years are needed to calculate a meaningful average growth rate.
Results are for informational purposes only and do not constitute professional advice.