# Average Return

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## Definition of 'Average Return'

The average return is a statistical measure of the performance of an investment over a period of time. It is calculated by taking the sum of all returns over the period and dividing by the number of returns.

The average return can be used to compare different investments and to make decisions about which investments to make. It can also be used to track the performance of an investment over time.

There are two main types of average returns: the arithmetic average and the geometric average. The arithmetic average is simply the sum of all returns divided by the number of returns. The geometric average is the nth root of the product of all returns, where n is the number of returns.

The arithmetic average is often used because it is easy to calculate. However, the geometric average is often a more accurate measure of performance because it takes into account the compounding effect of returns.

The average return is a useful tool for investors, but it is important to remember that it is only a single measure of performance. It does not take into account risk or other factors that may be important to investors.

Here are some additional things to keep in mind when using the average return:

* The average return is not a guarantee of future performance.

* The average return is only as good as the data used to calculate it.

* The average return can be affected by outliers, which are returns that are significantly higher or lower than the rest of the data.

Overall, the average return is a useful tool for investors, but it is important to use it with caution and to understand its limitations.

The average return can be used to compare different investments and to make decisions about which investments to make. It can also be used to track the performance of an investment over time.

There are two main types of average returns: the arithmetic average and the geometric average. The arithmetic average is simply the sum of all returns divided by the number of returns. The geometric average is the nth root of the product of all returns, where n is the number of returns.

The arithmetic average is often used because it is easy to calculate. However, the geometric average is often a more accurate measure of performance because it takes into account the compounding effect of returns.

The average return is a useful tool for investors, but it is important to remember that it is only a single measure of performance. It does not take into account risk or other factors that may be important to investors.

Here are some additional things to keep in mind when using the average return:

* The average return is not a guarantee of future performance.

* The average return is only as good as the data used to calculate it.

* The average return can be affected by outliers, which are returns that are significantly higher or lower than the rest of the data.

Overall, the average return is a useful tool for investors, but it is important to use it with caution and to understand its limitations.

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Copyright © 2004-2023, MyPivots. All rights reserved.