This tool calculates the geometric average return of your investments over multiple periods.
How to Use the Geometric Average Return Calculator
Enter the periodic returns separated by commas in the input field and then click the “Calculate” button. The result will be displayed in the result field below the button.
How It Calculates the Results
This calculator computes the geometric average return of a series of periodic returns. Here are the steps it follows:
- Takes the inputted returns and converts them to an array of numbers.
- Calculates the product of (1 + each return).
- Takes the n-th root of that product, where n is the number of returns.
- Subtracts 1 from the result to get the geometric average return.
- Multiplies by 100 to convert it into a percentage format.
Limitations
The calculator assumes that the returns are in percentage format. Returns should be entered as whole numbers, not decimals. For example, enter 10 for 10%, not 0.10. The calculator does not account for any external factors such as fees, taxes, or changing principal amounts.
Use Cases for This Calculator
Calculating the Geometric Average Return for a Single Investment
Enter the various returns for a single investment over different time periods to get the geometric average return. This use case is helpful for understanding the compounded growth of a single investment over time.
Comparing Geometric Average Returns of Multiple Investments
Input the returns of multiple investments to compare their geometric average returns. This feature allows you to evaluate which investment has provided the best compounded growth.
Forecasting Future Returns Based on Geometric Average Return
Predict the future value of an investment based on its geometric average return. This use case helps you estimate the potential growth of your investment over a specific period.
Evaluating Portfolio Performance Using Geometric Average Return
Analyze the overall performance of your investment portfolio by calculating the geometric average return of all investments. This tool provides a comprehensive view of how well your portfolio has grown over time.
Monitoring Long-Term Investment Growth
Track the compounded growth of your long-term investments by calculating the geometric average return. This feature helps you assess the effectiveness of your investment strategy over extended periods.
Assessing Investment Risk and Volatility
Determine the risk and volatility of an investment by examining its geometric average return. This use case offers insights into how stable or fluctuating the returns of an investment have been over time.
Analyzing Historical Performance of an Investment
Review the historical performance of an investment by calculating its geometric average return. This tool enables you to understand how consistent the returns of the investment have been over previous periods.
Comparing Geometric Average Return with Other Measures of Return
Contrast the geometric average return with other types of return metrics to gain a well-rounded view of your investment’s performance. This use case helps you understand the strengths and limitations of different return calculations.
Adjusting for Inflation Using Geometric Average Return
Factor in inflation when calculating the geometric average return to assess the investment’s real growth. This feature provides a more accurate representation of how much your investment has grown after accounting for inflation.
Enhancing Investment Decision-Making with Geometric Average Return Analysis
Utilize the geometric average return calculator to make informed investment decisions based on historical performance and growth potential. This tool empowers you to optimize your investment strategy for future success.