Average Return Calculator
Calculate the average annual return of an investment based on cash flows. This calculator helps you analyze your portfolio performance by considering deposits and withdrawals over time.
Average Annual Return: 0.00%
| Starting Balance | $0.00 |
|---|---|
| Ending Balance | $0.00 |
| Total Deposits | $0.00 |
| Total Withdrawals | $0.00 |
| Net Gain/Loss | $0.00 |
| Total Investment | $0.00 |
Average Annual Return: 0.00%
| Total Period | 0 years 0 months |
|---|---|
| Geometric Mean Return | 0.00% |
| Arithmetic Mean Return | 0.00% |
| Total Return | 0.00% |
About Average Return Calculator
The Average Return Calculator helps investors determine the annualized return of their investments, accounting for cash flows (deposits and withdrawals) over time. This provides a more accurate picture of investment performance than simple return calculations.
How to Calculate Average Return
There are two main methods for calculating average returns:
1. Cash Flow Based Calculation
This method calculates the internal rate of return (IRR) considering:
- The starting balance and date
- All deposits and withdrawals with their dates
- The ending balance and date
The calculator uses an iterative process to find the rate that equates the present value of all cash flows to zero.
2. Holding Period Based Calculation
This method calculates the geometric mean return for multiple holding periods:
- Enter each period's return percentage
- Specify the duration (years and months) for each period
- The calculator computes the compounded annual growth rate (CAGR)
Why Average Return Matters
Understanding your investment's average annual return helps you:
- Compare performance against benchmarks
- Make informed decisions about asset allocation
- Evaluate whether your investment strategy is meeting your financial goals
- Account for the impact of cash flows on your portfolio's growth