when looking at average historical returns the geometric average is a more precise calculation the geometric mean is always lower than the average return one benefit of using the geometric mean is that the actual amounts invested need not be known the calculation focuses entirely on the return figures themselves and presents an apples to apples comparison when looking at two or more investments performances over more various time periods 
the geometric average return is sometimes called the time weighted rate of return twr because it eliminates the distorting effects on growth rates created by various inflows and outflows of money into an account over time alternatively the money weighted rate of return mwrr incorporates the size and timing of cash flows making it an effective measure for returns on a portfolio that has received deposits dividend reinvestments and or interest payments or has had withdrawals the mwrr is equivalent to the internal rate of return irr where the net present value equals zero 