Total return
Encyclopedia
The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest
, dividend
s, and securities lending fees. This contrasts with the price return
, which takes into account only the capital gain on an investment.
Stock and bond funds provide annual Total Return values summarizing the last ten years of operation. Total Return assumes that dividends are reinvested in the funds.
A reasonably accurate equation for the percent Total Return in a year of any security is the sum of the percent gain (or loss, a negative percent) over the year in the security value, plus the annual dividend yield expressed as a percent (100 × annual dividends divided by the security price at the beginning of the year). This slightly understates the Total Return because it ignores the reinvestment of dividends, as soon as they are paid, for purchasing more of the security.
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
, dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s, and securities lending fees. This contrasts with the price return
Price return
The price return is the rate of return on an investment portfolio, where the return measure takes into account only the capital appreciation of the portfolio, while the income generated by the assets in the portfolio, in the form of interest and dividends, is ignored...
, which takes into account only the capital gain on an investment.
Stock and bond funds provide annual Total Return values summarizing the last ten years of operation. Total Return assumes that dividends are reinvested in the funds.
A reasonably accurate equation for the percent Total Return in a year of any security is the sum of the percent gain (or loss, a negative percent) over the year in the security value, plus the annual dividend yield expressed as a percent (100 × annual dividends divided by the security price at the beginning of the year). This slightly understates the Total Return because it ignores the reinvestment of dividends, as soon as they are paid, for purchasing more of the security.
See also
- Investment performanceInvestment performanceInvestment performance is the return on an investment portfolio. The investment portfolio can contain a single asset or multiple assets. The investment performance is measured over a specific period of time and in a specific currency....
- ReturnReturns (economics)Returns, in economics and political economy, are the distributions or payments awarded to the various suppliers of the factors of production.-Wages:...
- InterestInterestInterest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
- DividendDividendDividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...