marko
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 16, 2011
- Messages
- 8,472
I should know the answer to this but either I’m getting forgetful or something.
“Numbers is hard for me” so bear with me here.
I think I understand how total return includes dividends and cap gains.
I understand how dividends and cap gains reduce the price of a fund in equal measure. Two percent of dividends reduce the fund’s price by two percent. Net zero.
What I’m struggling with is, if a fund had absolutely zero growth for a year and only had dividends and cap gains, wouldn’t the total return be zero as, while you would have more shares, your fund’s total value would not change? I don't see how a 2% dividend could be considered a 'return' if your NW on that fund didn't change.
If so, a fund’s reported total return (divs and CGs included) would essentially be only organic growth. I’m trying to understand how a fund that reported a 7% total return in 2017 had a 4% div and CG included in that. Was only 3% (7 minus 4) organic or was the 7% organic as the 4% only delivered a net zero return?
Any insight from our gurus appreciated. Thanks in advance!
“Numbers is hard for me” so bear with me here.
I think I understand how total return includes dividends and cap gains.
I understand how dividends and cap gains reduce the price of a fund in equal measure. Two percent of dividends reduce the fund’s price by two percent. Net zero.
What I’m struggling with is, if a fund had absolutely zero growth for a year and only had dividends and cap gains, wouldn’t the total return be zero as, while you would have more shares, your fund’s total value would not change? I don't see how a 2% dividend could be considered a 'return' if your NW on that fund didn't change.
If so, a fund’s reported total return (divs and CGs included) would essentially be only organic growth. I’m trying to understand how a fund that reported a 7% total return in 2017 had a 4% div and CG included in that. Was only 3% (7 minus 4) organic or was the 7% organic as the 4% only delivered a net zero return?
Any insight from our gurus appreciated. Thanks in advance!