Total return index
Encyclopedia
A total return index is an index
that measures the performance of a group of components by assuming that all cash distributions are reinvested, in addition to tracking the components' price movements. While it is common to refer to equity based indices
, there are also total return indices for bonds
and commodities
.
A total return index is different from a price index. A price index only considers price movements (capital gains or losses) of the securities that make up the index, while a total return index includes dividends, interest, rights offerings and other distributions realized over a given period of time. Looking at an index's total return is usually considered a more accurate measure of performance.
The German stock market index DAX
is an example of a total return index, and the S&P 500
index has both a price return and a total return version.
Index (economics)
In economics and finance, an index is a statistical measure of changes in a representative group of individual data points. These data may be derived from any number of sources, including company performance, prices, productivity, and employment. Economic indices track economic health from...
that measures the performance of a group of components by assuming that all cash distributions are reinvested, in addition to tracking the components' price movements. While it is common to refer to equity based indices
Stock market index
A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds....
, there are also total return indices for bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
and commodities
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
.
A total return index is different from a price index. A price index only considers price movements (capital gains or losses) of the securities that make up the index, while a total return index includes dividends, interest, rights offerings and other distributions realized over a given period of time. Looking at an index's total return is usually considered a more accurate measure of performance.
The German stock market index DAX
DAX
The DAX is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system...
is an example of a total return index, and the S&P 500
S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
index has both a price return and a total return version.