Mutual Funds and Exchange Traded Funds (ETFs) hold portfolios of various companies' stock shares. When the companies pay a dividend, and when the fund trades shares, dividends and capital gains are distributed to the mutual fund shareholders. Mutual funds trade at the net asset value of the stock shares.
Total returns
Mutual funds report total returns based on reinvestment factors. Reinvestment factors are based on total distributions (dividends plus capital gains) during each period.
* Year 1 Reinvestment Factor = (Year 1 Total Distribution)/(Year 1 Share Price))+1.
* Year 2 Reinvestment Factor = ((Year 2 Total Distribution)x(Year 1 Reinvestment Factor)/(Year 2 Share Price))+1.
* Year 3 Reinvestment Factor = ((Year 3 Total Distribution)x(Year 2 Reinvestment Factor)/(Year 3 Share Price))+1.
* Year 4 Reinvestment Factor = ((Year 4 Total Distribution)x(Year 3 Reinvestment Factor)/(Year 4 Share Price))+1.
* Year 5 Reinvestment Factor = ((Year 5 Total Distribution)x(Year 4 Reinvestment Factor)/(Year 5 Share Price))+1.
Total Return = ((Final Price x Last Reinvestment Factor) - Beginning Price) / Beginning Price
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