Average Return Calculator
Find the average and annualised return across several years of gains and losses.
About the Average Return Calculator
Enter each year's return as a percentage, separated by commas. The calculator gives the simple (arithmetic) average, the annualised (geometric) return and the total return, with a chart comparing the actual path with a steady one.
The arithmetic average of yearly returns overstates what you actually earned when returns vary: a 50% gain followed by a 50% loss averages 0% but leaves you 25% down. The geometric average reflects real growth.
The formula
Geometric = (Π(1 + rₖ))^(1/n) − 1
- rₖ
- each year's return as a decimal
- Π
- multiply all the terms together
- n
- number of years
Worked example
Returns of 12%, −8%, 15%, 6%, 22% and −3%
- Simple average: 44 ÷ 6 = 7.333%
- 100 invested grows to 148.64, a total return of 48.64%
- Annualised: 1.4864^(1/6) − 1 = 6.829% a year
Questions people ask
Which should I quote?
The geometric (annualised) return for performance; the arithmetic average is used for forecasting a single year.
Why is geometric always lower?
Volatility drag: the more returns vary, the bigger the gap.
Can I enter monthly returns?
Yes, but the answer is then a monthly rate. Multiply growth over 12 months to get a yearly figure.