Total Return
In short
The complete gain or loss on an investment, including price change and dividends
If you bought a stock for £100, it went up to £110, and you also received £5 in dividends, your total return is £15 or 15%. It counts EVERYTHING — not just the price going up, but any cash the investment paid you along the way.
Total return captures the full economic benefit of an investment. It includes capital appreciation (or depreciation), dividends, interest, and distributions. Unlike price return, which only measures the change in asset price, total return reflects the actual wealth created for the investor. When comparing strategies or portfolios, always use total return for an accurate picture.
Formula
Total Return = (Ending Value - Beginning Value + Income) / Beginning Value × 100%Related concepts
- Compound Annual Growth Rate (CAGR) — Imagine you planted a tree that grew 50% in 3 years. CAGR tells you it grew about 14.5% each year on average — not 16.7% (50÷3), because growth compounds. It's like saying 'if my investment grew at a steady rate, what would that rate be?'
- Annualised Return — If your investment made 5% in 6 months, the annualised return is about 10.25% (not exactly 10%, because of compounding). It's like translating different languages into English — it converts returns from any time period into a yearly number so you can compare apples to apples.
- Dividend Yield — If a stock trades at $100 and pays $3 a year in dividends, the yield is 3% — similar to the interest rate on a savings account, but for a stock. Because yield is dividends divided by price, it also rises whenever the stock price falls, even if the dividend itself hasn't grown at all.