Average Return Calculator
$
$
10 yrs
Average Annual Return7.18%
Total Return100.00%
This average return calculator measures how an investment performed on an annualized basis between two points in time, converting total growth into the steady yearly rate that would have produced it. Rather than a simple arithmetic average, it uses the compound annual growth rate, which accounts for compounding and is the fair way to compare investments held for different lengths of time. Enter the beginning value, the ending value, and the number of years to see both the average annual return and the overall total return.
Formula
Average annual return = ((End / Begin)^(1/t) − 1) × 100
- Begin
- Beginning investment value
- End
- Ending investment value
- t
- Number of years held
How it works
- Enter the beginning value (your starting investment) and the ending value (what it is worth now or at the end of the period).
- Enter the number of years between those two values. The calculator divides the growth ratio across that span using a root, not a simple division, so compounding is respected.
- It reports the average annual return as the annualized compound rate, plus the total return percentage measuring the cumulative gain or loss over the whole period.
Worked example
An investment that grew from $10,000 to $18,000 over 7 years.
- Growth ratio = 18,000 ÷ 10,000 = 1.8.
- Annualize: 1.8^(1/7) − 1 = 1.0876 − 1 = 0.0876, or 8.76%.
- Total return = (18,000 − 10,000) ÷ 10,000 × 100 = 80%.
The average annual return is about 8.76%, and the total return over the 7 years is 80%.
Frequently asked questions
- Why use compound annual growth rate instead of a simple average?
- A simple average of yearly returns overstates performance because it ignores compounding and the order of gains and losses. The compound annual growth rate gives the single constant rate that turns the beginning value into the ending value, which is the honest annualized figure.
- How does total return differ from average annual return?
- Total return is the cumulative percentage gain over the entire period, while the average annual return spreads that growth evenly across each year. An 80% total return over 7 years equals about 8.76% per year compounded.
- Can this handle a loss?
- Yes. If the ending value is below the beginning value, both figures turn negative, showing the annualized rate of decline and the total percentage loss over the period.