Starting out
Return
What an investment gained or lost over a period, as a percentage of what it was worth at the start.
How it works
Total return counts both parts of the outcome: the change in price, and any income received along the way. Quoting only the price change is the commonest way to understate what a dividend-paying holding actually did.
A return is meaningless without its period and its starting point. "Up 40%" could be one exceptional year or a decade of mediocrity, and the two call for entirely different conclusions.
Where it misleads people
Percentage gains and losses are not symmetrical. A 50% fall needs a 100% gain to get back to where it started, which is why avoiding large drawdowns matters more than capturing large gains.
Formula
Total return = (end value − start value + income received) ÷ start value × 100Worked example
A share bought at $100 that pays $3 in dividends and ends the year at $105 returned (105 − 100 + 3) ÷ 100 = 8%, not 5%.
Related terms
- Total returnThe full return from an investment: price change plus every dividend or interest payment received.
- CAGRThe steady yearly rate that would have turned your starting value into your ending value.
- Time-weighted returnA return that strips out the effect of money you added or withdrew, so it measures the investments alone.
- DrawdownThe fall from a portfolio’s previous peak to its lowest point before it recovers.
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Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.