The most accurate measure of a mutual fund's
past and current performance is its
total
return, or the increase in share price plus reinvested
distributions. It's typically reported as percentage return, figured
by dividing the dollar value of the total return by the amount
of your initial investment.
For example, a $12,000 investment with a
one-year total return of $1,250 ($1,000 increase in value plus
$250 in reinvested distributions) has an annual percentage return
of 10.4%.
Reporting return
Total return is reported for several time
periods, such as 1-, 3-, 5- and 10-years, or for as long as the
fund has been in operation. When the figure is for periods longer
than a year, the number is annualized, or converted to an annual
figure by dividing the total return over the period by the number
of years in the period.
Among the key factors that influence total
return are the direction of the overall market or markets in which
the fund is invested, the performance of the fund's portfolio
of investments, and the fund's fees and expenses.
Expense ratios
An expense ratio reports fund fees as a percentage of fund assets. The higher the ratio, the more of the fund's assets are being used to cover its costs. In addition, all funds subtract transaction fees, which aren't part of the expense ratio, before calculating net asset value (NAV).
The most accurate measure of a mutual fund's
past and current performance is its
