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What is a return?

A return is the amount of money you make or lose. The full term is ‘return on investment’ and is represented as a percentage or a dollar amount.

Returns are the answer to the question, ‘What’s in it for me?’.

When someone invests, they are committing money to try and get a return through changes in price, dividends and interest payments, and capital gains distributions. When you account for all of these factors, you have your portfolio’s total return.

Changes in price happen when the value of an investment goes up or down. This gain or fall is based on a variety of factors.

Dividend payments are sometimes offered by companies. They are typically a distribution of their profits, paid out in proportion to how many shares a person owns.

Finally, capital gains distributions happen when an asset manager (AKA whoever is managing the fund) sells all or part of a holding. When you have shares of an ETF, capital gains distributions are paid out through dividend and interest payments.

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