Average Return Calculator
Average yearly returns with arithmetic and geometric means, volatility and CAGR. Measure real portfolio growth.
Enter each year's return as a percentage. Negative years are fine.
Average return
10%
Arithmetic mean of yearly returns
Compounded return
9.6%
Geometric mean — what you actually earned
Volatility
±10.8%
Standard deviation of yearly returns
Years counted
4
Number of returns entered
Arithmetic average overstates typical returns when years vary — the geometric mean (compounded return) is what your portfolio actually earned. CAGR is the same idea for a single start and end value.
Last updated: April 2026
How this calculator is verified
Checked by True Calculator automated test suite on
- Formula verified against a published worked example in the automated test suite
- Edge cases (zero, negative, boundary and unit-mismatch inputs) covered by unit tests
The full verification method is on our how we verify page. Found an error? Tell us and we will re-check it.
When to Use This Calculator
Use this calculator whenever someone quotes you an 'average return' and you want to know what that really means. The arithmetic mean answers a descriptive question; the geometric mean answers the practical one — what your money compounded at — and the difference between them is the real cost of volatile years. Portfolio statements and fund fact sheets in India show yearly returns, and this tool turns those columns into the two numbers that matter: true compounded growth and volatility. The CAGR mode covers the single-purchase case, converting a starting value, an ending value, and a holding period into one comparable annual rate — the standard way to compare a 5-year FD with a 7-year equity fund holding. Because returns are entered as percentages, the tool stays unit-free and works for any market or asset class.
How to Use This Calculator
- Step 1: Choose a mode — yearly returns for a series of annual percentages, or start-and-end value for CAGR.
- Step 2: In returns mode, enter each year's return percentage using the + button; negative years are fine.
- Step 3: Read the arithmetic mean, the geometric mean, and the volatility of the series.
- Step 4: In CAGR mode, enter the initial value, final value, and years held to get the annualised rate.
Worked Example
A fund delivers yearly returns of 10%, 20%, −5% and 15%. The arithmetic average is 10%, but the geometric mean — what the money actually compounded at — is 9.58%, with volatility of ±10.8%. Separately, an investment that grows from ₹1,00,000 to ₹2,00,000 in 5 years earns a 14.87% CAGR. The gap between 10% and 9.58% is the cost of the −5% year, which averages overstate.
Tips and Common Mistakes
- •Tip 1: Always quote the geometric mean or CAGR when describing what a portfolio actually earned.
- •Tip 2: Use the volatility card to compare two funds with similar averages — lower volatility delivered the same result with less risk.
- •Tip 3: Use CAGR mode to compare investments of different durations on one common scale.
- ✗Mistake 1: Avoid averaging percentages with different denominators — apply this tool to return series, not portfolio values.
- ✗Mistake 2: Avoid expecting the geometric mean to equal the arithmetic mean; they differ whenever returns vary.
Frequently Asked Questions
Why are the arithmetic and geometric means different?
The arithmetic mean simply averages the yearly percentages; the geometric mean compounds them year over year. For returns of 10%, 20%, −5% and 15%, the arithmetic mean is 10% but the geometric mean is 9.58% — the lower figure is what your money actually earned.
Which average should I quote for my portfolio?
Quote the geometric mean (or CAGR) — it reflects the real compounding result. The arithmetic mean overstates typical performance whenever returns vary, and the gap grows with volatility. Use the arithmetic figure only for simple descriptive averages.
What is CAGR and when should I use it?
CAGR is the single annualised rate that turns your initial value into your final value over the period — ₹1,00,000 to ₹2,00,000 in 5 years is a 14.87% CAGR. Use it to compare funds or investments over different time spans.
What does volatility tell me?
Volatility is the standard deviation of the yearly returns — how much they swing around the average. ±10.8% for our example series means returns in a typical year deviate from 10% by roughly 11 points. Higher volatility means a less predictable ride.
How does this help with Indian mutual funds?
Fund fact sheets show historical yearly returns; averaging them this way reveals the true compounded return and the risk. Compare two funds with similar averages — the one with lower volatility delivered the same result with less pain.
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