Average Return Calculator

This calculator has two modes:

• Start/End Values mode: enter the starting and ending value of an investment along with the time period. The calculator computes the CAGR, the smoothed annual rate that takes you from start to end.
• Annual Returns List mode: enter each year's return separated by commas (positive or negative). The calculator computes both the geometric mean (CAGR) and the arithmetic mean (simple average). Use negative numbers for down years.

Which return to use when: CAGR (geometric mean) accurately represents actual investment growth and is the standard for reporting fund performance. The arithmetic mean overstates returns because it ignores the compounding effect of losses. Always use CAGR when evaluating investments.

Example returns to try: S&P 500 approximate annual returns from 2019-2023 were 31.5, 18.4, 28.7, -18.1, 26.3. Enter those to see how the actual CAGR compares to the simple average.

CAGR (Compound Annual Growth Rate):

CAGR = (Ending Value / Starting Value)^(1/Years) - 1

Example: $10,000 grows to $25,000 in 10 years. CAGR = (25,000/10,000)^(1/10) - 1 = 2.5^0.1 - 1 = 9.60%/year.

Geometric mean from a series of returns:

Geometric Mean = (Product of (1 + each return))^(1/n) - 1

For returns of 10%, -5%, 15%: (1.10 × 0.95 × 1.15)^(1/3) - 1 = (1.20075)^(0.333) - 1 = 6.27%/year. The arithmetic average is (10 - 5 + 15)/3 = 6.67%, which overstates actual growth.

Total Return:

Total Return % = (Ending Value - Starting Value) / Starting Value × 100