# Total return index

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A '''total return index''' is an [index](/source/Index_(economics)) that measures the performance of a group of components by assuming that all cash distributions are reinvested, in addition to tracking the components' price movements.<ref name="investorwords">[http://www.investorwords.com/5008/total_return_index.html What is total return index? definition and meaning] InvestorWords.com. Retrieved November 21, 2011.</ref> While it is common to refer to [equity based indices](/source/Stock_market_index), there are also total return indices for [bonds](/source/Bond_(finance)) and [commodities](/source/commodity).<ref>[http://www.investopedia.com/terms/t/total_return_index.asp#axzz1eMyjdX4n Total Return Index Definition] Investopedia. Retrieved November 21, 2011.</ref>

A total return index (TRI) is different from a price return index. A [price return](/source/price_return) index only considers price movements (capital gains or losses) of the securities that make up the index, while a total return index includes dividends, interest, rights offerings and other distributions realized over a given period of time. Looking at an index's total return is usually considered a more accurate measure of performance.<ref name="investorwords"/>  Typically, taxation is different between [capital gains](/source/Capital_gains_tax) and [dividends](/source/Dividend_tax), so that the total return index only forms a rough approximation of what a long term investor can expect to keep after taxation.

Many stock indexes are calculated as a price return index and a total return index as well: The US stock index [S&P 500](/source/S%26P_500)<ref>[http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l-- S&P | S&P 500 | Americas] {{Webarchive|url=https://web.archive.org/web/20130605094650/http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l-- |date=2013-06-05 }} standardandpoors.com. Retrieved November 21, 2011.</ref> is an example of a price return index and the German stock market index [DAX](/source/DAX)<ref>[https://www.bloomberg.com/markets/stocks/movers/dax/ DAX: Stock Index Summary] Bloomberg. Retrieved November 21, 2011.</ref> is an example of a total return index.

The TRI is also used to develop a portfolio as a weighted combination of assets, as it is described in [modern portfolio theory](/source/modern_portfolio_theory). Though this theory is working with historical data, the models following this theory are trying to calculate the expected return based on a selected combination of assets. For example, in this way a stock portfolio representing a part of a stock index can be compared with the performance version of the stock index.

==References==
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Category:Stock market indices

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Adapted from the Wikipedia article [Total return index](https://en.wikipedia.org/wiki/Total_return_index) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Total_return_index?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.