What is the 'arithmetic mean'? Definition & meaning

The sum of a set of numbers added together and then divided by the total amount of numbers in that set.

‘Arithmetic mean’ is a fancy way of saying ‘mean’ or ‘average.’

To find the arithmetic mean, you add together a set of numbers and then divide your answer by the amount of numbers you had in that original set.

This may sound wordy - especially for math-o-phobes - but it’s really simple.

Take 1,2,3,4,5 as a set of numbers.

1+2+3+4+5 =15

In our original set, there were 5 numbers. So to get the average we just do….

15 ÷ 5 = 3

Simples.

More terms

Net asset value

Mutual funds and investment trusts are priced on their net asset value (NAV).

Formal admission

The moment new shares are officially admitted to the stock exchange and open to trading for everyone.

United States Dollar (USD)

The famous greenback our friends in the US use as currency.

Yield to maturity (YTM)

What is yield to maturity and why is it useful?

Securities

Bonds and stocks.

Yield

Income from an investment as a percentage of its current price.

Quantitative easing

Find out what quantitative easing is and how central banks use this monetary measure to encourage economic growth.

Ponzi Scheme

A form of fraud designed to lure new investors, and pays the earlier backers by using the new investors' money.

Diversification

An investment strategy in which money is put into a variety assets.

Arithmetic Mean