Complete Guide To Investment Companies, Funds And REITs

AAA

Mutual Funds - How To Measure Performance

The return on any investment, measured over a given period of time, is simply the sum of its capital appreciation and any income generated, divided by the original amount of the investment, which is expressed as a percentage. The term applied to this composite calculation is total return.

However, there is a difference in this simple concept as applied to stocks and mutual funds. Unfortunately, a great many mutual fund investors do not seem to have a clear understanding of a fund's total return. The relationships between a fund's
net asset value (NAV), yield (income) and capital gains distributions can be confusing. For stock investors, calculating and understanding their total return is relatively easy. By comparing how total return is derived for both stocks and mutual funds, you'll be able to better understand how this measure works for mutual funds.

Related Reading:

Returns


Related Articles
  1. Mutual Funds & ETFs

    Mutual Funds

    Mutual Funds
  2. Mutual Funds & ETFs

    A Mutual Funds Guide for Young Investors

    Learn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
  3. Mutual Funds & ETFs

    Understanding Mutual Fund Returns

    By Richard Loth (Contact | Biography)The return on any investment, measured over a given period of time, is simply the sum of its capital appreciation and any income generated divided by the ...
  4. Investing

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  5. Investing Basics

    4 Mistakes to Avoid When Choosing Mutual Funds to Invest in

    Mutual funds are a great way to build wealth but not all of them are the same. Investors have to be mindful of fees, turnover, redundancy and performance.
  6. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  7. Mutual Funds & ETFs

    Trading Mutual Funds for a Living: Is It Possible?

    Find out why trading mutual funds for a living isn't your best bet, including how funds discourage short-term trading and which options may better serve you.
  8. Mutual Funds & ETFs

    Mutual Funds: Introduction

    As you probably know, mutual funds have become extremely popular over the last 20 years. What was once just another obscure financial instrument is now a part of our daily lives. More than 8 ...
  9. Professionals

    Mutual Fund Benefits and Types

    NASAA Series 65: Section 9 Mutual Fund Benefits and Types. In this section types of mutual funds and their benefits.
  10. Mutual Funds

    What mutual funds are: Professionally managed pools of stocks, bonds and/or other instruments that are divided into shares and sold to investors. Pros: Diversification; liquidity; simplicity; ...
RELATED TERMS
  1. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  2. Mutual Fund Yield

    Dividend payments divided by the value of a mutual fund’s shares. ...
  3. NAV Return

    The change in the net asset value of an exchange-traded fund ...
  4. Exchange-Traded Mutual Funds

    Investopedia explains the definition of exchange-traded mutual ...
  5. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  6. Mutual Fund Liquidity Ratio

    A ratio published monthly by the Investment Company Institute ...
RELATED FAQS
  1. How much of a company's stock can a mutual fund own?

    There is no written rule that stipulates how much of a company a mutual fund can own. Instead, there are two major factors ... Read Answer >>
  2. How do dividends affect net asset value (NAV) in mutual funds?

    Understand how dividends affect the net asset value of mutual fund shares, and how this fits into the calculation of a mutual ... Read Answer >>
  3. Why is it that when investors realize returns on a mutual fund, its price tends to ...

    Mutual funds have been in existence since 1924, when the first open-ended mutual fund was created. Since then, the market ... Read Answer >>
  4. How do you find out the price of a mutual fund?

    The easiest way to find out the price of a mutual fund is to look at its net asset value (NAV). NAV is the total value of ... Read Answer >>
  5. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  6. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>

You May Also Like

Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center