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Total Return Formula:
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Total return is a performance measure that reflects the actual rate of return of an investment or a pool of investments over a given evaluation period. It includes interest, capital gains, dividends, and distributions realized over the period.
The calculator uses the total return formula:
Where:
Explanation: This formula calculates the percentage gain or loss on an investment, accounting for both price appreciation and income received.
Details: Total return provides a comprehensive view of investment performance, making it essential for comparing different investments, assessing portfolio performance, and making informed investment decisions.
Tips: Enter the beginning value, ending value, and total dividends received in the same currency. All values must be positive numbers with the beginning value greater than zero.
Q1: Why is total return important for investors?
A: Total return provides a complete picture of investment performance by including both capital gains and income, allowing for better comparison between different investment options.
Q2: How does total return differ from price return?
A: Price return only considers changes in the investment's price, while total return includes all sources of return including dividends, interest, and other distributions.
Q3: Can total return be negative?
A: Yes, if the sum of the end value and dividends is less than the beginning value, the total return will be negative, indicating a loss on the investment.
Q4: Should I use total return for all types of investments?
A: Total return is most relevant for investments that generate income, such as stocks (dividends), bonds (interest), and real estate (rental income).
Q5: How often should I calculate total return?
A: It depends on your investment strategy, but common periods include monthly, quarterly, or annually. Regular calculation helps track performance over time.