Measuring performance
Total return
The full return from an investment: price change plus every dividend or interest payment received.
How it works
Price return alone understates what a holding delivered whenever it paid income. For dividend-paying markets, reinvested income has historically accounted for a large share of the long-run total.
It is the only basis on which two investments can be fairly compared, because a company that returns cash to shareholders and one that retains it will otherwise look artificially different.
Where it misleads people
Index levels quoted in the media are usually price indices, which exclude dividends. Comparing your total-return portfolio against a price index makes you look better than you are, by roughly the dividend yield each year.
Formula
Total return = (ending price − starting price + income) ÷ starting price × 100Related terms
- ReturnWhat an investment gained or lost over a period, as a percentage of what it was worth at the start.
- DividendA cash payment a company makes to its shareholders out of its profits.
- Adjusted closeA historical closing price restated to account for dividends and splits, so returns compare fairly over time.
- BenchmarkThe index or reference portfolio you measure yourself against, to see whether your decisions added anything.
- Price returnThe return from price movement alone, ignoring dividends and interest.
Mentioned in
More in Measuring performance
- Tracking difference
- Time-weighted return
- Tracking error
- Survivorship bias
- Unrealised profit and loss
- Sortino ratio
- Sharpe ratio
- Annualised
All 29 Measuring performance terms · The full glossary, 433 terms
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.