Average Return Calculator guide
Average Return Calculator: CAGR and Average Returns
Use our average return calculator to work out the geometric average (CAGR) and arithmetic average of investment returns.
By the AllCalculator editorial teamUpdated 16 October 20261 min read
If an investment went up 50% one year and down 50% the next, the simple average is 0%, but you'd actually have lost 25%. Our Average Return Calculator gives you the true average.
How to use the calculator (Average Return Calculator)
Choose what you have:
- Yearly returns: type each year's return, like 12, −8, 15.
- Start and end values: enter the values and the number of years.
Two kinds of average
- Arithmetic average: add the returns and divide by the number of years.
- Geometric average (CAGR): the steady yearly return that gives the same end result.
CAGR = (end value ÷ start value)^(1 ÷ years) − 1
A worked example
With the calculator's default settings, returns of 12%, −8%, 15%, 6% and 9%:
- Arithmetic average: 6.8%
- Geometric average: 6.48%
- £1,000 would have grown to £1,369
Frequently asked questions
Which average should I use?
The geometric average for judging how an investment actually performed. The arithmetic average is sometimes used to estimate the expected return in a single year.
Why is the geometric average lower?
Losses hurt more than equal gains help, so the more returns vary, the bigger the gap.
Sources and further reading
Links open official and independent websites in a new tab.
This guide is general information to help you understand your options. It isn't financial, tax, legal or building advice and doesn't take your personal circumstances into account. Figures were checked when the guide was last updated and can change, so confirm anything important with GOV.UK, HMRC, a regulated adviser or a qualified tradesperson.