The returns on investment funds are reported in terms their total return. It comprises income return and capital return.
The total return on an investment fund is its net asset value (NAV) on a given date plus the reinvestment of all fund dividends received during the period divided by its NAV when purchased, expressed as a percentage. It includes all asset-based fees, such as management fees, administrative expenses, 12b-1 fees, which are automatically deducted from fund assets.
Total return is used as the basis to measure the performance of fund investments and commonly measured for the last month, the last quarter and the last four quarters (year). The year-to-date return is the total return from the beginning of the year to today, updated daily.
The annualized total return for periods longer than one year is the compounded average annual return, which is a better indication of fund performance than nonannualized figures. A fund’s annualized total return from a particular date for over a specific time period, normally ending on the last day of the most recent day, month, quarter or year, is its trailing return.
| 10-Year Trailing Returns of US Stock Funds as of June 2015 | ||||||
| Asset-Weighted Performance | Equal-Weighted Performance | |||||
| Active (%) | Passive (%) | Active (%) | Passive (%) | Active | Passive | |
| Large Blend | 6.74 | 7.68 | 6.42 | 7.24 | 10.80 | 13.07 |
| Large Value | 6.76 | 7.31 | 6.24 | 6.52 | 10.77 | 12.77 |
| Large Growth | 8.05 | 9.27 | 7.12 | 8.27 | 10.88 | 11.82 |
| Mid Blend | 7.78 | 9.28 | 7.10 | 8.82 | 9.24 | 10.32 |
| Mid Value | 8.38 | 7.82 | 7.99 | 7.49 | 9.38 | 14.18 |
| Mid Growth | 8.70 | 9.34 | 7.76 | 8.54 | 7.67 | 10.07 |
| Small Blend | 7.63 | 8.52 | 6.93 | 7.72 | 3.84 | 6.11 |
| Small Value | 7.86 | 7.93 | 7.04 | 7.01 | 3.43 | 8.18 |
| Small Growth | 8.14 | 9.13 | 6.92 | 8.33 | 3.34 | 4.32 |
| Source: Morningstar | ||||||
Load-adjusted total return is the annualized total return reduced by the sales charge or redemption fee for the trailing one-, three-, five- and 10-year periods. For front-end load funds, the full amount of the load is deducted. For deferred or back-end load funds, the percentage charged commonly declines the longer shares are held and usually disappears entirely after several years.
Income return is that portion of a fund’s total return received in the form of income distributions. Capital return is that portion of a fund’s total return from realized and unrealized increases in the value of securities in the portfolio.
Whereas income return comprises most of the total return on bond funds, a stock fund’s returns may result entirely from capital return. Income return and capital return tell investors whether a fund’s returns come from income, an increase in the value of its investments, or a combination of the two.