Definition
Total return measures the overall gain or loss on an investment over a period, combining price change with income received such as dividends, interest or fund distributions. It is usually shown as a percentage of the starting value.
How it works
Price return counts only the change in price. Total return adds the income received, so a share that pays dividends can have a higher total return than its price change alone suggests. Calculations differ on whether income is reinvested in more units or simply held as cash, and the choice should be stated.
Fund and index providers often publish total-return series that assume reinvestment on the ex-dividend date, sometimes after a withholding-tax assumption, and over long periods the assumption matters. Compare like with like: the same currency, dates, and treatment of costs and tax.
Formula / convention
Total return = (Ending price − Beginning price + Income received) ÷ Beginning price × 100% (income not reinvested)
Illustrative example
Illustration with fictional figures: a stock bought at HK$50.00 pays HK$2.00 in cash dividends and ends the year at HK$52.00, so its price return is (52 − 50) ÷ 50 = 4.0% and its total return without reinvestment is (52 − 50 + 2) ÷ 50 = 8.0%. If the dividend was reinvested at HK$51.00, it buys 2 ÷ 51 ≈ 0.0392 extra shares, so the position ends at about 1.0392 × HK$52 = HK$54.04, a total return of about 8.08%.
What to watch for
A total-return figure that quietly assumes reinvestment, ignores taxes or excludes fund costs can overstate what a real investor receives. Price-only charts and total-return charts of the same asset are not interchangeable.