What does the 'total return' concept in investments entail?

The concept of 'total return' in investments encompasses all forms of income generated by an investment, making it the most comprehensive measure of an investment's performance. This includes not only capital gains, which reflect the appreciation in the value of the investment itself, but also any income received, such as dividends from stocks or interest from bonds. By considering all potential sources of return, total return gives investors a complete picture of how an investment has performed over time, allowing for better comparisons and decisions.

For example, an investment in a stock that appreciates in value is beneficial, but if that stock also pays out dividends, those dividends contribute additional income. Total return captures both these aspects, ensuring that investors account for income along with capital gains, which can be especially important in long-term investment strategies.