What is total return? | Investing Definitions | Morningstar (2024)

FAQs

What is total return? | Investing Definitions | Morningstar? ›

For ETFs and mutual funds, total return includes both the price change of the shares and the assumption that all dividend and capital gain distributions are reinvested.

Total return is a metric that represents all returns on an investment, including capital gains and other financial rewards. This metric allows a more thorough understanding of the performance of investments and potential investment opportunities.

Expressed in percentage terms, Morningstar�s calculation of total return is determined by taking the change in price, reinvesting, if applicable, all income and capital-gains distributions during that month, and dividing by the starting price.

The formula for calculating total return is Total Return = (Ending Value - Beginning Value + Dividends or Interest) / Beginning Value * 100.

ROI indicates total growth, start to finish, of the investment. IRR identifies the annual growth rate. The two numbers should normally be the same over the course of one year (with some exceptions), but they will not be the same for longer periods.

Total return includes interest, capital gains, dividends, and realized distributions. Total return is expressed as a percentage of the amount invested.

Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average. Some years will deliver lower returns -- perhaps even negative returns. Other years will generate significantly higher returns.

[ Annual Return = (ending value / beginning value)^(1 / number of years) – 1 ] When we know the annual return but not the total return, we can calculate total return by adding one to the annual return rate and raising it to the power of the number of years of the investment period.

The main difference between the two strategies can be seen in the promised risk/return profile. While total return funds aim to generate as much returns as possible from all eligible sources, absolute return funds try to achieve positive returns in all market environments.

Total return tells you how much your portfolio has increased or decreased in value over a given period. Personal return, by contrast, takes into account the timing of buy and sell transactions.

What is the difference between today's return and total return? ›

What is the difference between total return and today's return? Total return is a measure of the value that an investment has produced since it was added to your portfolio. Today's return only looks at the change in value for the current day, as compared to the closing price on the previous day.

The measure "total return" consists of reinvested dividends added to the share price value. Total return, for a given period, is defined as share price performance including the value of all reinvested dividends.

Net Return indices include dividends after the deduction of withholding taxes. TR - means Total Return. GR - means Gross Return. Total Return and Gross Return are the same.

ROI and IRR are complementary metrics where the main difference between the two is the time value of money. ROI gives you the total return of an investment but doesn't take into consideration the time value of money. IRR does take into consideration the time value of money and gives you the annual growth rate.

General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.

There isn't a one-size-fits-all answer, but generally, an IRR of around 5% to 10% might be considered good for very low-risk investments, an IRR in the range of 10% to 15% is common for moderate-risk investments, and in investments with higher risk, such as early-stage startups, investors might look for an IRR higher ...

Typically, investors express total return as a percentage change in the value of an investment. Total return can be either positive or negative. Total return may or may not ignore things like commissions, taxes, and other sales charges.

The return on an investment usually involves two elements: the capital (or price) return, and the income return. The sum of both the capital and income return is then called the “total” return.

[ Annual Return = (ending value / beginning value)^(1 / number of years) – 1 ] When we know the annual return but not the total return, we can calculate total return by adding one to the annual return rate and raising it to the power of the number of years of the investment period.