Stocks give you, the investor, two ways to make money. You can make money by buying low and selling high, profiting from capital gains. Or you can receive a dividend (a cash payment to a holder of a firm's stock) from the company. A total return index looks to take advantage of both methods. Any dividends issued by shares in the fund get reinvested, and are used by the fund manager to buy more stock.
This setup stands in opposition to other types of funds that explicitly generate income for investors. The dividends in these other funds don't get poured back into new share purchases. They get mailed out as checks.
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Finance: What Is a Real Return?67 Views
finance- a la shmoop. what is a real return? like is there a fake return? you
know like the news? well kinda .real return refers to an [man frowns talking to camera]
investment return mapped against inflation. so let's say you invest in a
bond that pays five percent a year for ten years and then pays you back your
principal .boring but nice- you know like a good doctor visit. your nominal return
over that period was 5% but since inflation was 3% a year during that
period on average your real return was only 2% a year- meaning that the
performance of your investment only eked out a 2% net gain against the price of [equation]
milk gas and you know knocked off iPhones. so don't be a chump who thinks
that they're making more money than they really are, and you know keep on keeping
it real. [man sitting in chair, talks to camera]
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