A unit trust fund’s performance can be measured by its total return. A fund’s total return is the change in the value of an investment in the fund, taking into account any change in the fund’s unit price during the period and assuming the reinvestment of income and capital gains distributions.
Total return is commonly presented in two ways.
1. Fund’s cumulative total return
Total rise in the value of a fund’s investments over time, assuming that income and capital gains distributions were reinvested.
2. Average annual total return
Which is the compounded total return, it would take each year to produce the fund’s cumulative total return. Seemingly modest annual returns can be converted, through the power of compounding, into impressive cumulative returns. For example, an average annual total return of 7% would, after ten years, amount to a cumulative total return of 97%.
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