Quickly estimate your investment performance with our Average Return Calculator. Compute total return (ROI), average annual return (CAGR), and the arithmetic or geometric mean of periodic returns to see a clear picture of how your portfolio has performed over time.
Why average return matters
Average return is a core metric for evaluating investments. It helps you understand how your money has grown (or shrunk) on average per period, whether those periods are months, quarters, or years. Investors frequently look at multiple views: overall change from start to finish (ROI), the annualized pace of growth (CAGR), and the average of individual period returns (arithmetic and geometric means). Each view answers a slightly different question and together they provide a more complete understanding of risk and performance.
What this calculator computes
- Total Return (ROI): The percentage change from the starting value to the ending value.
- Average Annual Return (CAGR): The smoothed, annualized growth rate that would take your initial value to the final value over a given number of periods.
- Arithmetic Average of Periodic Returns: The simple average of all period returns you enter.
- Geometric Average of Periodic Returns: The compounded average that accounts for volatility from period to period.
Arithmetic vs. geometric average
The arithmetic average is the simple mean of returns. It is easy to compute and is useful for expectations over a single period. However, it can overstate long-term performance because it does not capture compounding or the effect of volatility.
The geometric average multiplies period growth factors and then takes the nth root, effectively showing the compounded average per period. This is generally the better metric when you want to summarize performance over multiple periods. As a rule of thumb, the greater the volatility, the larger the gap between arithmetic and geometric averages.
How to use the Average Return Calculator
- Enter your Initial value and Final value.
- Specify the Number of periods between those two values (years, months, etc.).
- Optionally paste a list of Periodic returns separated by commas or line breaks. Choose whether they are in percent or decimal form.
- Select your preferred Rounding and click Calculate.
The calculator will report ROI and CAGR from the starting and ending values. If you provide a list of period returns, it will also report the arithmetic and geometric averages of those returns, as well as the number of periods recognized from your list.
Example
Suppose you invested $10,000 and it grew to $12,100 in 2 years. Your ROI is 21%. The CAGR is approximately 10% per year, because 10,000 × (1.10)^2 ? 12,100. If your yearly returns were 12% and 8%, the arithmetic average is 10%, while the geometric average is about 9.95% (since (1.12 × 1.08)^(1/2) ? 1 ? 0.0995).
Best practices and limitations
- Cash flows: CAGR assumes no contributions or withdrawals between the starting and ending values. If you have cash flows, consider money-weighted returns (IRR) instead.
- Data quality: For periodic returns, ensure you include every period so the averages reflect the full timeline.
- Volatility: Expect the arithmetic average to exceed the geometric average when returns fluctuate.
- Units: Keep your period unit consistent. If you enter monthly returns, the geometric and arithmetic averages will be per month.
- Comparisons: Use the same basis (e.g., all annual) when comparing two investments.
When to use each metric
Use ROI to describe the overall gain or loss across the entire timeframe. Use CAGR to compare multi-year performance across different investments on an annualized basis. Use the geometric average of periodic returns to summarize the typical compound return per period from a series of period-by-period data. The arithmetic average is handy for quick expectations or modeling single-period scenarios.
Turn insights into action
With a clearer picture of average returns, you can set realistic goals, benchmark managers or funds, and refine your asset allocation. Whether you track a retirement portfolio, a single stock, or an index strategy, our Average Return Calculator provides the practical numbers you need to make informed decisions.