Previously, we discussed how you can keep track of a mutual fund by defining Net Asset Value, dividends, dividend yield, and capital gains. In this session we discuss the measurement of mutual fund performance. Every investment can be tracked in some way, shape or form. Mutual funds are tracked based on total return.
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.