Average Return Calculator
Compute the arithmetic mean, geometric mean (compound annual growth rate), and standard deviation of a series of annual returns.
Inputs
Geometric mean (CAGR)
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Arithmetic mean
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Standard deviation (volatility)
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Cumulative total return
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Sharpe-like ratio (vs 4%)
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About Average Return Calculator
Why CAGR is the right "average"
Arithmetic mean overstates real growth when there is volatility. A +50% then -50% gives a 0% arithmetic mean but -25% cumulative (geometric mean -13.4%). Always use CAGR for compounding wealth.
Volatility drag
CAGR ≈ arithmetic mean − (variance / 2). Higher volatility eats into compound returns. This is why a steady 7% beats a volatile 9% over long horizons.
Sharpe ratio interpretation
Above 1.0 is excellent, 0.5-1.0 is good, below 0 means you would have been better off in T-bills. Hedge funds target 1+, S&P 500 long-term is ~0.4.