About the Average Return Calculator
If an investment rises 50 percent one year and falls 50 percent the next, the simple average return is zero, but you have lost a quarter of your money. That gap is why investors use the geometric average, which reflects compounding. This average return calculator takes the return for each year as a list and gives both the simple average and the true compound average yearly return, along with the total growth over the period, the best and worst years and the volatility. If you enter a starting amount, it shows what it would have grown to, and what the simple average wrongly suggests.
Updated October 2026
How to use the Average Return Calculator
- 1Type the return for each year as a percent, separated by commas. Use a minus sign for a loss.
- 2Optionally enter the amount you started with.
- 3Read the geometric average, which is the true yearly growth rate.
- 4Compare it with the simple average and see the ending value.
- 5Check the best year, worst year and standard deviation for a sense of risk.
A simple example
Suppose 1,000 grows by 10 percent in year one and falls 10 percent in year two. The arithmetic average is 0 percent, so you might expect to still have 1,000. In fact you have 1,000 times 1.10 times 0.90, which is 990. The geometric average is minus 0.5 percent a year, which tells the truth. This is why a fund that gains and loses a lot can underperform one that grows steadily at the same simple average.
How to use the results
- Quote the geometric average when describing past growth.
- Use the arithmetic average only to estimate a single typical year, not long-run growth.
- Compare the standard deviation of two investments, not only their averages.
- Remember that past returns do not guarantee future ones.
Related tools
The CAGR Calculator finds a growth rate from two values, the ROI Calculator measures total return, the Compound Interest Calculator projects growth, the Standard Deviation Calculator and Average Calculator summarise any set of numbers, and the Mutual Fund Calculator shows how fees reduce returns over time.
Features
- Simple (arithmetic) average return
- True compound (geometric) average return
- Total growth over all years
- Best year, worst year and volatility
- Ending value of a starting amount
- Comparison with the misleading simple average
- Runs in your browser
Frequently asked questions
What is the difference between arithmetic and geometric average return?
The arithmetic average adds the yearly returns and divides by the number of years. The geometric average multiplies the growth factors, takes the root and subtracts 1, so it includes compounding. The geometric figure is the constant yearly return that would give the same ending value, which makes it the right one to quote for past performance.
Why is the geometric average lower?
Losses hurt more than gains help: after a 50 percent fall you need a 100 percent gain to recover. Whenever returns vary, the geometric average is lower than the arithmetic one, and the bigger the swings, the bigger the gap.
How do I calculate the average annual return?
Convert each yearly return to a growth factor by adding it to 1, such as 1.12 for 12 percent. Multiply them all together, take the nth root where n is the number of years, and subtract 1. The calculator does this for you.
What is the CAGR?
The compound annual growth rate is the same thing as the geometric average return, worked out from the start and end values: ending divided by starting value, to the power of 1 over the number of years, minus 1. Use the CAGR Calculator if you only know the start and end values.
What does standard deviation tell me?
It shows how much the yearly returns vary around their average. A high standard deviation means a bumpy ride and a bigger difference between the arithmetic and geometric averages. Two investments with the same average can have very different risks.
Does it include fees, tax or inflation?
Only if you have already taken them out of the yearly returns you enter. For a real return, subtract inflation from each year or use the Inflation Calculator separately.