Average Return Calculator

Calculate arithmetic average, CAGR, and annualised returns for any investment.

Investment Details

1 yr30 yrs
Formula: ROI = (Net Profit / Cost) × 100
ROI = (35,000 / 1,00,000) × 100 = 35%

Return on Investment

+35%

Net Profit / Loss

+₹35,000

Annualized ROI (CAGR)

10.52%/yr

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Average Return Calculator Formula & How It Works

Arithmetic Mean = ΣRᵢ / n | CAGR = (FV/PV)^(1/t) − 1
  • Arithmetic mean: simple average of annual returns
  • Geometric mean (CAGR): accounts for compounding — always ≤ arithmetic mean
  • FV = Final value, PV = Initial value, t = Years
  • Annualised return = ((1 + Total Return)^(1/t) − 1)

The arithmetic mean overstates investment performance because it doesn't account for compounding. If a fund returns +50% in year 1 and −50% in year 2, arithmetic mean = 0%, but CAGR = −13.4% (you lost money). Always use CAGR for investment comparisons.

Average Return Calculator FAQs

What is the difference between average return and CAGR?

Average (arithmetic mean) return is the sum of annual returns divided by years. CAGR (geometric mean) is the actual compounded annual rate. CAGR is always ≤ average return and better represents investment experience.

What is the S&P 500 average annual return?

The S&P 500 has historically returned about 10% per year (nominal) or ~7% real (inflation-adjusted) as arithmetic mean, and roughly 9% CAGR over long periods. Returns vary widely year-to-year: +30% some years, −40% in crashes.

How do I calculate total return on an investment?

Total Return = (FV − PV + Dividends) / PV × 100%. For a $10,000 investment that became $14,000 with $500 in dividends: Total Return = (14,000 − 10,000 + 500) / 10,000 × 100% = 45%.

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