Average Return Calculator (CAGR)
Find the true average yearly return from a list of returns.
Two kinds of average
The arithmetic average adds the returns and divides by the number of years. The geometric average (also called CAGR, the compound annual growth rate) is the steady yearly return that would give the same final result. When returns vary, the geometric average is lower, and it is the one that matches what your money actually did.
Example
Yearly returns of 10, −5, 20, 8, −12 and 15 percent have an arithmetic average of 6%, but the geometric average (CAGR) is only about 5.39%. A starting amount of 10,000 grows to about 13,706, a total return of 37.06%.
A fall of 50% needs a rise of 100% to recover, which is why the simple average can flatter volatile returns. Use the geometric figure to compare investments.
Frequently asked questions
Which average should I quote?
Use the geometric average (CAGR) to describe past growth.
Can I enter monthly returns?
Yes, but the result is then a monthly average. Multiply by 12 for a rough yearly figure, or enter yearly returns.
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