Expressed in percentage terms, Morningstar's calculation of total return is determined each month by taking the change in monthly net asset value, reinvesting all income and capital-gains distributions during that month, and dividing by the starting NAV. Reinvestments are made using the actual reinvestment NAV, and daily payoffs are reinvested monthly. Unless otherwise noted, Morningstar does not adjust total returns for sales charges (such as front-end loads, deferred loads and redemption fees), preferring to give a clearer picture of a fund's performance. The total returns do account for management, administrative, 12b-1 fees and other costs taken out of fund assets. Total returns for periods longer than one year are expressed in terms of compounded average annual returns (also known as geometric total returns), affording a more meaningful picture of fund performance than non-annualized figures. 

 

Annualized Returns

For standard time periods (1, 3 5 and 10 years) returns are annualized as follows:

 

Ann Ret = ((1+Cum Ret/100)^(1/y) -1) * 100

 

where,

 

Cum Ret = the cumulative return

y = the number of years (1,3, 5 or 10)

 

For customized time periods returns are annualized as follows:

 

Ann Ret = ((1+Cum Ret/100)^(365.25/d) -1)*100

 

where,

 

Cum Ret = the cumulative return

d = the number of days between the start and end date

 

 

For equities, only market return can be calculated (since no NAV exists), but the market return is also stored as the total return. This is done so that users can more easily compare a stock's return to that of other investments.

 

Market Return does not reinvest dividends. Dividends are treated as a cash payout as of the end of the period. The calculation is point to point using adjusted price at the beginning of the period and the adjusted price at the end of the period incorporating any dividends paid. Therefore, it doesn't compound returns/the impact of dividends reinvested over that period.

The equity's Market Return is calculated as follows:

Where

P	=	Adjusted prices (Adjustments include: Stock Split, Stock dividend, and Right issues)
D	=	Adjusted regular Cash and Special Cash Dividend
Spin	=	Approximate value of spin-off shares calculated as follows: (Price of stock at close before ex, minus the price of stock at close on ex-date, minus any dividends received on the ex-date) When there are multiple Spins, Spin values are summed up

 

Note: - If a company changes trading currency, Morningstar converts all the historical prices to the latest currency before calculating return. The daily spot rate is used to convert the historical prices to the latest currency. Weekly Returns are not a metric provided for the investments of which return source are monthly/quarterly surveyed returns, such as CIT, SMA, due to the nature of return source, they are not calculated by daily prices and distributions. The data point weekly return is available in the universes where investments are priced daily

 

 

See Sample Calculation: TOTAL RETURN