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Annual return of Bond funds. What does that include?
When one reads that a Bond Fund has a 10% return for 2009 does that include the appreciation of that fund in 2009 or does that also include appreciation plus income distributed for that fund in 2008?
If it is a reference to a mutual fund, then it would include both any appreciation and any income. If a reference is to a closed-end fund, ETF or a stock, then it would be share appreciation only. That's my understanding.
From footnote on CEFconnect.com: "Annualized total return ... calculation assumes that all income and capital gains distributions by the Fund have been reinvested at net asset value (share price) on the ex dates during the period."
From State Street's sheet on SPY ETF: "All total return figures assume reinvestment of dividend and capital gains at net assets value; actual returns may differ." https://www.spdrs.com/product/fund.seam?ticker=spy
With securities priced on an exchange (e.g. ETF, CEF), you have to pay special attention to whether the return figure is relative to market price or NAV price. For example, iShare's Russell 3000 (IWV) sheet gives: "Average Annualized Total Returns (NAV)." When you go to the detailed performance sheet, you see two different return figures, one based on NAV (not labeled as such, but it's Total Returns), and one based on market price (labeled Market Price Returns). http://us.ishares.com/product_info/fund/overview/IWV.htm (info sheet - NAV based) http://us.ishares.com/product_info/fund/performance/IWV.htm
Generally speaking, "total returns" include reinvested dividends. But to be sure, you have to check the data definition for the source of the data.
I'm less sure about stocks. Then there are HOLDRs. HOLDRs are a weird hybrid, and I won't even attempt to speak to them, except to note that they are essentially "pass through" baskets - you are regarded as the owner of the underlying stocks, you receive dividends from each of the underlying stocks separately, and the sponsor (Merrill Lynch) only allows owners to hold round lots (multiples of 100 shares). This makes reinvestment problematic, which in turn raises questions about what "total return" represents for these vehicles.
I ask this because I have been watching a fund FFRhx fidelity Floating rate high income Fund where the 30 day yield is 2.30% but the NAV stays the same for long periods. During that time there have been income distributions. So I assume the income is purchasing more reinvested shares but the NAV does not drop like an equity fund. Therefore you have to use the total new amount of shares to see that your dollar balance has increased. But it still is a mystery to me how the return is calculated from the fund NAV alone. So if the NAV is 10 on Jan1 2010 and is again 10 on dec.31 2010 and their is $1 distributin during the year. I assume the return is 10% for the year even though the price of the share never went up. Is that correct? Prinx
For Mutual funds use M* return numbers which include dividends and other distributions in the calculation.
FFRHX is a type of bond fund that issues daily dividends. Thus, the fund NAV does not drop like other funds. The daily dividends are kept separate and not re-invested immediately and the collected dividends are issued to the holder at the end of the month. At this time, if you chose to re-invest dividends more shares of the fund is purchased with that money.
Comments
"Annualized total return ... calculation assumes that all income and capital gains distributions by the Fund have been reinvested at net asset value (share price) on the ex dates during the period."
From State Street's sheet on SPY ETF:
"All total return figures assume reinvestment of dividend and capital gains at net assets value; actual returns may differ."
https://www.spdrs.com/product/fund.seam?ticker=spy
With securities priced on an exchange (e.g. ETF, CEF), you have to pay special attention to whether the return figure is relative to market price or NAV price. For example, iShare's Russell 3000 (IWV) sheet gives: "Average Annualized Total Returns (NAV)." When you go to the detailed performance sheet, you see two different return figures, one based on NAV (not labeled as such, but it's Total Returns), and one based on market price (labeled Market Price Returns).
http://us.ishares.com/product_info/fund/overview/IWV.htm (info sheet - NAV based)
http://us.ishares.com/product_info/fund/performance/IWV.htm
Generally speaking, "total returns" include reinvested dividends. But to be sure, you have to check the data definition for the source of the data.
I'm less sure about stocks. Then there are HOLDRs. HOLDRs are a weird hybrid, and I won't even attempt to speak to them, except to note that they are essentially "pass through" baskets - you are regarded as the owner of the underlying stocks, you receive dividends from each of the underlying stocks separately, and the sponsor (Merrill Lynch) only allows owners to hold round lots (multiples of 100 shares). This makes reinvestment problematic, which in turn raises questions about what "total return" represents for these vehicles.
and their is $1 distributin during the year. I assume the return is 10% for the year
even though the price of the share never went up. Is that correct?
Prinx
FFRHX is a type of bond fund that issues daily dividends. Thus, the fund NAV does not drop like other funds. The daily dividends are kept separate and not re-invested immediately and the collected dividends are issued to the holder at the end of the month. At this time, if you chose to re-invest dividends more shares of the fund is purchased with that money.