Definition of Trailing Total Return

Investors can calculate the trailing total return rate.

Investors can calculate the trailing total return rate.

The trailing total return statistic displays the potential rate of return a mutual fund could have earned from today back to a specific date. Mutual fund sellers frequently include a trailing total return estimate when showing the performance results for a fund over one month, three months, one year, three years, five years and 10 years. Investors can examine the trailing total return statistic for any investment, which can be an effective method of comparing financial instruments.

Calculating Total Return

Investment analysts calculate trailing return by examining the change in share price over the specified time period, adding dividends paid out per share, then converting this amount to a percentage gain or loss. For instance, a mutual fund share that had a value of $20 a year ago is now valued at $24. The fund also paid dividends of $1 per share during the year. The shares each gained $5 in value over the year, so the trailing total return rate is $5/$20, or +25 percent.

Studying Published Returns

With the advent of the internet and the widespread availability of data, the mutual fund industry has begun publishing monthly updates on their funds' trailing total returns. The statistic known as "trailing twelve months," or TTM, shows the trailing total return of a fund for the previous 12 months. As opposed to the traditional methods of publishing return statistics on a quarterly basis, the fund managers publish the TTM numbers at the end of each month.

Examining Historical Trends

The trailing return statistic examines how an investment changed in value based on its past history. The advantage offered by the study of trailing returns is that the totals usually account for results up to the end of the previous month. The new data help investors determine whether a fund appears to be a potentially profitable investment. However, investors should be aware that a fund's past returns are not necessarily an indicator of future performance.

Finding Return Data

Investors can also calculate the trailing return for any stock or mutual fund share over any time period on their own. Many companies, mutual fund brokers and financial media outlets allow visitors to their websites search for share price data by date. These sites also allow users to find the amounts and dates of any dividends paid off on those shares. The sum of the current share price and dividends, divided by the earliest share price, will deliver the trailing total return rate.

About the Author

Living in Houston, Gerald Hanks has been a writer since 2008. He has contributed to several special-interest national publications. Before starting his writing career, Gerald was a web programmer and database developer for 12 years. He also started Story Into Screenplay, a screenwriting blog at www.StoryIntoScreenplay.com.

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