Average Return Calculator
Estimate investment performance based on cash flows or calculate average returns over different holding periods.
Average Return Based on Cash Flow
This calculator estimates the average annual return of an entire account based on the starting and ending balances as well as the dates and amounts of deposits or withdrawals.
Cash Flow Return Results
| Investment Period | |
| Starting Balance | |
| Ending Balance | |
| Net Deposits/Withdrawals | |
| Average Annual Return |
Investment Growth
Multiple Returns Results
| Total Investment Period | |
| Number of Return Periods | |
| Average Annual Return | |
| Cumulative Return | |
| Growth Factor |
Return by Period
Understanding Investment Returns
Average Return
The average return is defined as the mathematical average of a series of returns generated over a period of time. For cash flow calculations, it’s the rate at which the beginning balance concludes as the ending balance, accounting for deposits and withdrawals made over time. The time value of money is accounted for, which is a theory that states that a dollar today is worth more than a dollar tomorrow.
Average Rate of Return
The average rate of return (ARR), also known as the accounting rate of return, is the average amount (usually annualized) of cash flow generated over the life of an investment. ARR does not account for the time value of money. As a result, it is best to use ARR in conjunction with other metrics when considering large financial decisions.
Cumulative Return
Cumulative return refers to the aggregate amount an investment gains or loses irrespective of time, and can be presented as either a numerical sum total or as a percentage rate. It is generally contrasted with annual return, which is the return (or loss) of an investment in a single year only.
Tips for Investment Analysis
- Use multiple metrics to evaluate investment performance
- Consider both average and cumulative returns for a complete picture
- Account for inflation when analyzing long-term returns
- Compare returns against appropriate benchmarks for your asset class
- Remember that past performance doesn’t guarantee future results