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Average Return Calculator
CAGR against the arithmetic mean, and why they differ.
Enter each period's percentage return. Negatives are fine.
—
| Period | Return | Growth factor | Cumulative value of 100 |
|---|
Compound annual growth rate
—
Arithmetic average—
Geometric average—
Volatility drag—
Standard deviation—
Cumulative return—
Growth multiple—
Best period—
Worst period—
Quick Tool Overview
The Average Return Calculator computes the compound annual growth rate from a series of returns or from a start and end value, and shows it against the simple arithmetic average — a gap that is not rounding, but the cost of volatility.
- What it does
- Calculates CAGR and compares it against the arithmetic mean
- You give it
- A list of yearly returns, or a start value, end value and term
- You get back
- The CAGR, the simple average and the volatility drag between them
- Best for
- Judging what an investment actually returned
About the Average Return Calculator
Enter a series of annual returns, or just a starting and ending value with a time period, to get the compound annual growth rate. The calculator reports it alongside the simple arithmetic average and shows the gap between the two.
That gap is not a rounding difference, it is the cost of volatility. A portfolio that falls fifty percent and then rises fifty percent has an arithmetic average return of zero but has actually lost a quarter of its value, because the recovery applies to a smaller base. The geometric mean, or CAGR, is the only average that reflects what actually happened to the money, and it is always lower than the arithmetic mean whenever returns vary at all. The wider the swings, the wider the gap.
Key features of the Average Return Calculator
Volatility drag exposed
Down fifty then up fifty averages zero but loses a quarter of the money, and the calculator shows exactly that.
Two input modes
A full return series, or just the endpoints and the time between them.
Both averages reported
Geometric for what happened, arithmetic for a single expected period — they answer different questions.
Any period length
Years, quarters or months, annualised consistently.
Cumulative return shown
The total growth over the whole period alongside the annualised rate.
How to use the Average Return Calculator
-
1
Choose your input
Enter a list of yearly returns, or a starting value, ending value and number of years.
-
2
Read the CAGR
The constant annual rate that would have produced the same final result.
-
3
Compare the arithmetic mean
The simple average is shown alongside, along with the gap volatility created between them.
-
4
Check the volatility drag
The larger the swings in the return series, the more the simple average overstates performance.
Frequently asked questions
Compound annual growth rate: the single constant rate that would take an investment from its starting value to its ending value over the period. It is the honest measure of what an investment actually delivered.
Because losses need larger gains to recover from. A fifty percent fall requires a hundred percent rise to break even, so volatility drags the compounded result below the simple average whenever returns vary.
For estimating a single future period, since it is the expected value of one year. For describing what happened over multiple periods, the geometric mean is the correct measure and the arithmetic one is misleading.
No, it assumes a single lump sum held throughout. When money goes in and out during the period, the money-weighted return, calculated as an IRR, is the appropriate measure instead.
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