Average Return Calculator

What this calculator does

Working out how an investment performed sounds easy: look at what you put in, look at what it is worth now, done. It gets slippery the moment you have added money or taken some out along the way, because then a simple before-and-after comparison no longer tells the truth. This calculator handles that properly. You lay out your starting balance, your ending balance, and every deposit and withdrawal in between with its date, and it works out the annual return that genuinely accounts for all of it.

Why the timing of your money matters

Here is the trap. Suppose you start with a modest balance, and then, just before a good run, you pour in a large deposit. Your ending balance looks wonderful. But if you measured your return by the naive method, comparing the end to the start, you would credit the investment with growth that really came from the extra money you added, not from performance.

The size of a contribution and when it went in both change how much work the investment actually did. Money that was invested for the full stretch pulls its full weight. Money added near the end barely had time to grow. To get an honest return, you have to weight every pound by how long it was actually in there, and that is exactly the job this tool takes on.

How it works out your return

The calculator treats every entry as a dated cash flow: money going in on a certain day, money coming out on another. Then it searches for the single annual rate that ties all of those dated amounts together so they balance. That rate is your money-weighted return, known in finance as the internal rate of return, and because the tool uses the real dates you enter, it reflects the actual timeline of your investing, not a rough approximation.

In plain terms, it finds the one steady yearly rate that, applied to each deposit and withdrawal for exactly the time it was invested, explains how you got from your starting balance to your ending balance. That is the fairest single number for a portfolio you have been adding to and drawing from.

A worked example

Take the calculator's own starting figures. You begin with 5,600 on the 1st of January 2022, and by the 30th of April 2025 the balance is 18,000, with nothing added or withdrawn in between. That is a little over three and a quarter years. The calculator reports an average return of 42.01% per year.

Now watch what a contribution does. Add a 2,000 deposit partway through, on the 1st of June 2023, and the annual return drops to about 33.19%. Nothing about the ending balance was handed to the investment for free this time: because some of that final 18,000 came from your own later deposit rather than from growth, the true performance rate is lower. That shift is the whole point, and it is why entering your deposits and withdrawals honestly gives you a number you can actually trust.

The return this measures, and how it differs

It is worth knowing exactly what this figure is, because there is more than one way to measure a return. What this calculator gives you is a money-weighted return: it reflects not just how the investments did, but how well your own timing of deposits and withdrawals worked out. That makes it the right number for judging your personal result.

It can differ from the headline return a fund advertises, which is usually a time-weighted return designed to strip out the effect of investor cash flows so the fund's own performance stands alone. Neither is wrong; they answer different questions. Yours answers "how did my money do," and the fund's answers "how did the fund do." And as ever, whichever number you look at, it measures the past. Past performance does not predict future results. To adjust a return for inflation, our real rate of return calculator helps, and for a single lump with no cash flows, the return on investment calculator is simpler.

How to use it

The table starts with two rows you fill in, and you add more for anything that happened in between:

• Starting Balance. What the investment was worth at the start, and the date.
• Ending Balance. What it is worth now, and the date.
• Deposit or Withdraw. Use the Deposit/Withdraw button to add a row for each contribution or withdrawal, with its amount and the date it happened.

Press Calculate for your annual return, and Reset to return to the starting example.

Questions people ask

How is the average return calculated?

By treating your starting balance, ending balance, and every deposit and withdrawal as dated cash flows, then finding the single annual rate that reconciles them all. This is the money-weighted return, also called the internal rate of return.

Why is my return different from what my fund reports?

Funds usually quote a time-weighted return, which removes the effect of when you added or withdrew money so the fund's own performance is isolated. This calculator gives a money-weighted return, which includes your timing. They measure different things, so they can differ.

Do my deposits count as returns?

No, and that is the point. The calculator separates money you added from money the investment earned, so contributions do not get mistaken for growth. That is why adding a deposit lowers the reported return rather than inflating it.

References

The money-weighted return, or internal rate of return, that this tool computes is a standard method described in corporate finance texts such as Brealey, Myers, and Allen below. The guidance on how returns are presented, and that past performance does not predict future results, follows the U.S. Securities and Exchange Commission.

1. U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy. Investor Bulletin: Performance Claims. investor.gov
2. Brealey, R. A., Myers, S. C., and Allen, F. Principles of Corporate Finance (internal rate of return). McGraw-Hill.