Average Return Calculator · Practical guide
How to Calculate Average Annual Return
From a list of yearly returns to a single average — the quick way and the compounding-correct way.
At a glance
The Quick Method
Add the annual returns and divide by the number of years. For returns of 10%, 20%, and −5%, the arithmetic average is (10 + 20 − 5) ÷ 3 = 8.33%. That is the typical single-year return, and the calculator above shows it the moment you enter the series.
Interactive tool
Average Return Calculator
Enter your own values, then compare the result with the examples below.
Results
The Compounding-Correct Method
To find the rate your money actually grew at, convert each return to a multiplier, multiply them, and take the nth root: (1.10 × 1.20 × 0.95)^(1/3) − 1 = 1.254^(1/3) − 1 ≈ 7.84%. That geometric average — CAGR — is the steady annual rate that turns your starting balance into your ending one. Here it is a half-point below the arithmetic 8.33%.
What the Same Series Does to $10,000
| Year | Return | Balance |
|---|---|---|
| Start | — | $10,000 |
| 1 | +10% | $11,000 |
| 2 | +20% | $13,200 |
| 3 | −5% | $12,540 |
Check: compounding $10,000 at 7.84% for three years gives $10,000 × 1.0784³ ≈ $12,540 — the geometric average reproduces the endpoint exactly, while 8.33% would overshoot at about $12,713.
Longer Series Work the Same Way
For the five-year series 8, −2, 12, 5, 7, the arithmetic average is 6.00%, the geometric average is 5.90%, and total growth is 1.332x. The more volatile the series, the wider the gap between the two averages. Enter your own yearly returns — negative values included — to get all four figures at once.
Frequently Asked Questions
Do I include dividends in annual returns?
Yes, for a total-return figure. Add the year's dividend yield to the price change before entering it; excluding dividends understates the true average.
What if my returns are monthly instead of annual?
Enter them the same way, but treat the result as a monthly average. Annualize the geometric rate with (1 + r)^12 − 1.
Can average annual return be negative even with mostly up years?
Yes. One deep loss can outweigh several gains — years of +10%, +10%, +10%, and −30% have a geometric average of about −1.75%.
Is the average annual return guaranteed to repeat?
No. It summarizes the past; the standard deviation the calculator shows alongside it tells you how much any single year is likely to differ from that average.