Average Return Calculator
Return Parameters
Calculation Results
| Geometric Mean (CAGR) | — |
|---|---|
| Total Cumulative Return | — |
How to Use This Average Return Calculator
Someone proudly averages "+10% and −10%" and calls it break-even—it isn't. The geometric path lost money. This calculator separates the headline arithmetic average from the CAGR that actually describes your wealth curve.
- Choose calculation method. Start and End Values (CAGR) for balance snapshots, or List of Annual Returns when you have yearly percentages.
- CAGR mode: Enter starting value, ending value, and years held.
- List mode: Enter each year's return % in the textarea (one per line or comma-separated).
- Press Calculate. Review geometric mean (CAGR), arithmetic mean (list mode), and cumulative return.
For cash-flow-based performance, use the IRR Calculator or ROI Calculator.
Average Return Formulas and Practical Applications
Arithmetic mean treats each year's percentage equally; geometric mean chains them the way your account balance actually compounds. After volatile years, always trust geometric/CAGR for "what did I really earn per year?"
CAGR from start and end
CAGR = (Ending / Starting)1/t − 1
Growing $50,000 to $80,000 over 6 years implies CAGR near 8.1%, regardless of the wild path in between.
Volatility drag example
Returns of +20% and −10% average arithmetically to +5%, but $100 becomes $108—only +3.92% geometrically. That's why fund marketing sometimes cherry-picks arithmetic averages.
Frequently Asked Questions
What is the difference between CAGR and arithmetic average return?
CAGR (geometric mean) is the constant annual rate that grows starting value to ending value. Arithmetic mean is the simple average of yearly returns and usually overstates compounded growth when returns vary.
When should I use start/end value mode vs list mode?
Use start/end mode when you only know opening and closing balances plus years held. Use list mode when you have each year's return percentage.
Why is geometric mean lower than arithmetic mean?
Volatility drag: losses require larger gains to recover, so the simple average of yearly percentages overshoots the actual compounded path.
How do I enter annual returns in list mode?
Enter one return per line or separated by commas in the textarea—e.g., 10, -5, 8 for three years of returns.
Does this include dividends or fees?
Only if they are already reflected in the starting value, ending value, or annual return figures you enter.