Reviewed by Gotrade Internal Analyst
When you check an investment, it is tempting to look only at the price chart. Did the price go up or down?
Total return goes one step further. It shows the full result of an investment by combining price movement with all the cash it paid you along the way.
In simple terms:
Total return = capital gains or losses + dividends and other income
For long term investors, total return is usually a better measure of performance than price alone.
Total Return Definition
Total return is the overall gain or loss on an investment over a period of time, including:
- Any change in price
- Any income you received, such as dividends or interest
You can express it in money terms or percentage terms.
If you want the percentage:
Total return (%) = (Ending value + income received − starting value) ÷ starting value × 100
That number tells you how hard your money actually worked, not just how the chart looks.
Components of Total Return
1. Capital gains and losses
This is the part most people watch.
- If you bought a stock at 100 dollars and it is now 120 dollars, you have a capital gain of 20 dollars per share.
- If it falls from 100 dollars to 85 dollars, you have a capital loss of 15 dollars per share.
Capital gains can be realized (you sold) or unrealized (you are still holding). Total return usually looks at the value as if you sold at the end of the period.
2. Dividends and other income
Many stocks and ETFs pay dividends. Bonds and bond funds pay interest.
This cash is part of your return, even if the price did not move much.
Two investors can own the same stock price chart but have very different results if one collects and reinvests dividends and the other does not.
You can:
- Take dividends as cash, or
- Reinvest them into more shares, which can boost future dividends and compounding
3. Fees, taxes and currency effects
In the real world, a complete view of total return also considers:
- Fees: broker commissions, fund expense ratios and other costs reduce your net result
- Taxes: dividend and capital gains taxes can make a big difference, depending on where you live
- Currency moves: if you invest in US assets from another country, exchange rates can add or subtract from your return
Most charts you see focus on price only and ignore these, which is why it pays to understand what sits behind the numbers.
Why Total Return Matters More Than Price Alone
Looking only at price can be misleading. Here are a few common traps.
A stock that “went nowhere”
Imagine a stock that:
- Starts at 50 dollars
- Ends the year at 50 dollars
- Pays a 5 percent dividend
The price chart looks flat, but your total return is about 5 percent before fees and taxes.
If you reinvested that dividend, your long term outcome could be very different from someone who only looks at price.
Comparing funds and ETFs
Fund A might have a nicer looking price chart than Fund B, but if:
- Fund B paid higher dividends
- Fund B has lower fees
then Fund B could actually have the better total return. This is why professional investors almost always compare funds on a total return basis.
Focusing on yield only
High dividend yield alone does not guarantee strong total return. If a company:
- Pays a big dividend
- But its earnings and stock price are slowly shrinking
your income may not offset the capital loss. Total return forces you to look at both sides.
How To Use Total Return In Your Investing
1. Compare investments fairly
When you compare:
- Two dividend stocks
- A stock and an ETF
- A growth ETF and a value ETF
look at total return over the same time period, not just price. Many broker apps and financial sites let you toggle to “total return” or “performance including dividends.”
2. Think in long term “total return buckets”
You can build your portfolio using total return thinking:
- Growth bucket: stocks or ETFs where most of the return is expected from price appreciation
- Income bucket: dividend stocks or ETFs that combine steady payouts with modest growth
- Stability bucket: cash and bonds with lower expected return but less volatility
Your overall wealth path is then driven by the combined total return of these buckets, instead of chasing whatever has the hottest price chart right now.
3. Decide what to do with dividends
Total return helps you choose how to use your income:
- If you are still building wealth, reinvesting dividends can boost long term compounding
- If you are closer to living off your portfolio, you might take dividends as cash and accept slower growth
There is no one right answer. What matters is that you are aware of the trade off and look at the total outcome, not just the quarterly payout.
4. Use tools that show total return clearly
Some platforms make it easier to track total return than others. With an app like Gotrade, you can:
- Buy fractional shares of US stocks and ETFs from small amounts
- See how your positions are doing over time, including both price movement and dividends
- Build a portfolio that reflects your own total return goals, rather than trading on headlines
- Trade and invest for 24 hours, 5 days.
Conclusion
Total return is the real scoreboard for your investments. It combines:
- Capital gains and losses
- Dividends and other income
to show how much your money truly grew or shrank over time.
By focusing on total return rather than price alone, you can compare investments more fairly, avoid chasing yield, and make better long term choices.
When you are ready to put this into practice, you can start building a diversified, total return focused portfolio of US stocks and ETFs from as little as 1 dollar with Gotrade.
FAQ
1. What is total return in simple terms?
Total return is the total profit or loss from an investment, including both price changes and any dividends or interest you receive.
2. Why is total return more important than just price?
Because price ignores dividends and income. Total return shows your full result, which is what actually matters for your wealth over time.
3. Is dividend reinvestment included in total return?
Yes. When you reinvest dividends, total return reflects both the extra shares you bought and any future gains they generate.
Reference:
- Morningstar, Total Return, 2026.
- Investopedia, What Is Total Return?, 2026.
Disclaimer:
Gotrade is the trading name of Gotrade Securities Inc., which is registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.
