Finances
Average Return Calculator
Calculate the arithmetic average and geometric average (CAGR) of an investment portfolio.
Comment Utiliser
- Select the method: Yearly Rates if you have a list of annual percentages, or Total Values if you only know the starting and ending portfolio balances.
- Enter your data.
- The calculator determines the CAGR (Geometric Mean). This is the "true" rate of return that accounts for the compounding effect of volatility, which is always lower than a simple arithmetic average.
Formule
Arithmetic Average:
(R₁ + R₂ + ... + Rₙ) / n
Geometric Average (CAGR):
If rates: [ (1+R₁) × (1+R₂) × ... × (1+Rₙ) ]^(1/n) - 1
If values: (Ending Value / Starting Value)^(1/Years) - 1
(R₁ + R₂ + ... + Rₙ) / n
Geometric Average (CAGR):
If rates: [ (1+R₁) × (1+R₂) × ... × (1+Rₙ) ]^(1/n) - 1
If values: (Ending Value / Starting Value)^(1/Years) - 1
The Average Return Calculator illustrates why simple averages deceive investors. By calculating both the arithmetic mean and the Compound Annual Growth Rate (CAGR) from historical returns, it accurately measures the true compounding performance of stocks and mutual funds.