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What you'll see when checking performance

When you look at your investment returns, you'll notice there are different ways of measuring performance.

POINTS TO KNOW

  • Your personal performance results can differ from the reported performance of your investments if you make changes during the period being reported.
  • Your "total" return includes both increases in share price and any income payments.

Total return, income, yield—what does it all mean?

Once you get used to checking your investment performance, you'll be able to focus specifically on the numbers that are important for your situation. Here are some of the most common questions we get about performance.

My investment company says my fund returned 10% last year. But I didn't make nearly that much. What's going on?

Investment companies report performance assuming someone made a lump-sum investment on the first day of the reporting period and then did nothing until the end of the period. But that might not match with your experience.

First, you may have started investing in the fund at some point during the period. Or you may have made multiple small investments.

On the other hand, you may have withdrawn money during the period. Even if you put it back later, your return won't match the fund's return anymore.

Fund performance numbers also assume that all of the dividend and interest payments distributed during the period were immediately reinvested in the fund. If you took the cash instead, that will also affect your personal performance.

What is "30-day yield"?

The Securities and Exchange Commission (SEC) requires stock and bond mutual funds and ETFs (exchange-traded funds) to publish a yield figure that gauges how much income you might receive from the fund each year. The figure is based on income payments during the previous 30 days.

For example, if you had $50,000 to invest, then a fund with a 30-day yield of 2% could potentially give you $1,000 a year in income payments.

Keep in mind, though, that this calculation is based on the previous month—so it won't perfectly represent what will happen in the future.

You may see other yield measures reported for your investments. But the 30-day yield is the best one for estimating future income. Just remember that in most cases, an investment's yield is useful only if you're currently counting on your investments for income.

What is "total return"?

Total return figures take into account not only the increases (and decreases) in the prices of the shares you own but also the value of any payouts you received. (It also assumes these payouts are reinvested and continue to grow.)

For instance, your stock fund's share price may have gone from $50 to $60 during the reporting period, which would be a 20% increase. If the fund also paid a dividend of $5 per share, your total return is 30%.

I see my fund's "after-tax return," but how do you know how much I pay in taxes?

First, you can ignore "after-tax return" if you hold the mutual fund or ETF in a tax-advantaged account like an IRA, because all your earnings in this account will be deferred or exempt anyway.*

If you do own the fund in a taxable account, the after-tax return is simply an approximation of how much of the return will be left after taxes are taken out, for the average investor. It may not (and probably won't) match your specific situation.

But if you're comparing 2 similar funds, the after-tax return can be helpful. Depending on the funds' investment and trading strategies, 1 fund may be subject to more taxes than the other.


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REFERENCE CONTENT

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Performance

The measure of how much an investment has paid off, also known as return.

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Returns

The profit you get from investing money. Over time, this profit is based mainly on the amount of risk associated with the investment. So, for example, less-risky investments like certificates of deposit (CDs) or savings accounts generally earn a low rate of return, and higher-risk investments like stocks generally earn a higher rate of return.

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Dividend

The distribution of the interest or income produced by a fund's holdings to its shareholders, or a payment of cash or stock from a company's earnings to each stockholder.

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Interest

Income you can receive by investing in bonds or cash investments. The investment's interest rate is specified when it's issued.

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Stock

Usually refers to common stock, which is an investment that represents part ownership in a corporation. Each share of stock is a proportional stake in the corporation's assets and profits.

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Bond

A bond represents a loan made to a corporation or government in exchange for regular interest payments. The bond issuer agrees to pay back the loan by a specific date. Bonds can be traded on the secondary market.

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Mutual fund

A type of investment that pools shareholder money and invests it in a variety of securities. Each investor owns shares of the fund and can buy or sell these shares at any time. Mutual funds are typically more diversified, low-cost, and convenient than investing in individual securities, and they're professionally managed.

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ETF (exchange-traded fund)

A type of investment with characteristics of both mutual funds and individual stocks. ETFs are professionally managed and typically diversified, like mutual funds, but they can be bought and sold at any point during the trading day using straightforward or sophisticated strategies.

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Yield

The income on an investment, expressed as a percentage of the investment's value.

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Income

The interest and dividends generated by an investment.

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Share

A single unit of ownership in a mutual fund or an exchange-traded fund (ETF) or, for stocks, a corporation.

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IRA

A type of account created by the IRS that offers tax benefits when you use it to save for retirement.

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Earnings

The investment returns you accumulate on the savings in your account.