What Is Total Return?
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# What Is Total Return?

Sudhan P
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We know that it’s hard for newbies to navigate the stock market jungle.

Therefore, in this series, we make investing definitions as easy to understand as possible so that you are not left wandering.

Last week, we looked at what “capital gain” means.

Right now, we will delve into a new term, and that is “total return”.

So, what exactly is total return?

Total return is a stock‘s capital gain (in percentage terms) added to its dividend yield

In other words, the total return on an investment includes both capital appreciation and dividend income.

Say you bought a stock for \$1 and sold it at S\$1.05 at the end of one year; the capital gain you would get is S\$0.05. In percentage terms, the return is 5% ((S\$0.05/S\$1) x 100%).

If the stock has a dividend yield of 3% per annum, your total return would, therefore, be 8% (5% + 3%).

Calculating total return gives a holistic performance of your stock or portfolio as opposed to looking at capital gain alone.

For more in the “What Is” series, you can head here.

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It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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