Total return is expressed as a percentage, with higher numbers being better than lower ones. Both dividends and capital gains distributions were discussed last session. Total return is always a trailing figure, based on historical performance. Although the measure is important, it is also important to remember that it is not necessarily predictive. You cannot expect the same performance in the future as in the past.
Time is also an important element when considering total return.
For periods less than one year, such as 3 months or 6 months, total return is measured from the start of the period to the end. For periods longer than one year, however, the percentage is usually annualized. This means that performance is measured from the start of the period to the end of the period, and then broken down to an average yearly figure. Actual performance, however, could have been much more volatile. Indeed, the fund could have gone up considerably in the first year and treaded water the other two years, or it could have done just the opposite.