Average return calculator

Enter a series of yearly returns. Get both the arithmetic average (simple mean) and the geometric average (true compounded return / CAGR), plus volatility.

Annual returns (%)

Geometric mean (CAGR)

Arithmetic mean

Standard deviation

Best / worst year

0% / 0%

Arithmetic vs geometric mean

Suppose you get returns of +50%, then -50% over two years. Your arithmetic mean is 0% (average of +50 and -50). But your actual ending wealth is 100 × 1.5 × 0.5 = 75 — a 25% LOSS over two years.

Geometric mean = (∏(1 + r_i))^1/n − 1

The geometric mean is the only correct way to describe compounded returns over multiple periods. It's always less than or equal to the arithmetic mean, with the gap growing with volatility.

Why volatility matters

Two funds with the same arithmetic average can have very different compounded returns. The one with higher volatility — bigger swings — will compound at a LOWER rate. That's why low-volatility investments often outperform flashy high-volatility ones over long periods.

Approx: Geometric ≈ Arithmetic − σ²/2

FAQ

Which mean should I quote?

For historical performance over multiple years, ALWAYS use geometric. Arithmetic mean is misleading for compound growth.

What's a typical standard deviation?

Indian/US equity index: 15-20% annually. Bonds: 3-8%. Individual stocks: 25-60%. Lower SD = more predictable.

Average return calculator