Average Return Calculator

Average return measures the typical performance of an investment over time. There are different methods to calculate it, each providing unique insights. The arithmetic mean is the simple average of all returns, while the geometric mean (CAGR) accounts for compounding effects and provides a more accurate measure of actual growth. Understanding both metrics helps investors evaluate investment performance realistically, considering volatility and the impact of negative returns on overall growth.

• •Arithmetic mean is always higher than geometric mean when returns vary
• •Geometric mean (CAGR) represents the true compound growth rate of your investment
• •Higher standard deviation indicates more volatile and potentially riskier investments
• •Sharpe ratio helps compare risk-adjusted returns - higher is better (typically `>` 1 is good)
• •Negative returns have a disproportionate impact on compounded growth