Total Return Index

AAA

DEFINITION of 'Total Return Index'

A type of equity index that tracks both the capital gains of a group of stocks over time, and assumes that any cash distributions, such as dividends, are reinvested back into the index. Looking at an index's total return displays a more accurate representation of the index's performance. By assuming dividends are reinvested, you effectively have accounted for stocks in an index that do not issue dividends and instead, reinvest their earnings within the underlying company.

INVESTOPEDIA EXPLAINS 'Total Return Index'

The Standard & Poor's 500 Index (S&P 500) is one example of a total return index. The total return indexes follow a similar pattern in which many mutual funds operate, where all resulting cash payouts are automatically reinvested back into the fund itself.

While most total return indexes refer to equity based indexes, there are total return index that for bonds, which assumes that all coupon payments and redemptions are reinvested by buying more bonds in the index.

RELATED TERMS
  1. Dow Jones Industrial Average - ...

    The Dow Jones Industrial Average is a price-weighted average ...
  2. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
  3. Total Return

    When measuring performance, the actual rate of return of an investment ...
  4. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  5. Index

    A statistical measure of change in an economy or a securities ...
  6. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
Related Articles
  1. Economics

    The ABCs Of Stock Indexes

    Indexes can track market trends, but they're not always reliable. Can you trust them?
  2. Investing

    Is it possible to lose all of your investment in an index fund?

    There are few certainties in the financial world, but we can say that there is almost zero chance that any index fund could ever lose all of its value.There are a few reasons for this. First ...
  3. Mutual Funds & ETFs

    Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.
  4. Pimco has stabilized its Total Return fund, but its returns are still shaky and its sales load is still a fat one.
    Professionals

    A Look At Pimco's Total Return Fund Post-Gross

    Pimco has stabilized its Total Return fund, but its returns are still shaky and its sales load is still a fat one.
  5. 10 equity mutual funds bargains for any investor or financial advisor.
    Professionals

    10 Equity Mutual Fund Bargains

    10 equity mutual funds bargains for any investor or financial advisor.
  6. Chart Advisor

    A Total Stock Market ETF For Any Portfolio

    Utilizing index funds and ETFs, such as Vanguard's VTI, is one of the best ways for the average investor to track the broad markets and minimize fees.
  7. Trading Strategies

    What's the safest way to invest in high-yielding dividend stocks?

    Learn about some of the most important safety factors that you need to consider before you invest in high-yielding dividend stocks.
  8. Africa's economic growth and growing stability has gotten the attention of adventurous investors. What kind of ETF or mutual fund options are available?
    Mutual Funds & ETFs

    Destination Africa: These Funds Offer Easy Access

    Africa's economic growth and growing stability has gotten the attention of adventurous investors. What kind of ETF or mutual fund options are available?
  9. Retirement

    What is the minimum amount of money that I can invest in a mutual fund?

    Learn about investing in mutual funds even with a smaller initial investment; there are many funds available to investors with smaller purchase amounts.
  10. Mutual Funds & ETFs

    What does a mutual fund's beta coefficient measure?

    Evaluate the risk associated with a particular mutual fund by determining its beta coefficient, which illustrates the fund's volatility versus the market.

You May Also Like

Hot Definitions
  1. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  2. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  3. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  4. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Law Of Supply And Demand

    A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply ...
Trading Center