How do I understand performance?
Investment performance is your total return, made up of both income and capital growth. In an investment performance measurement table, returns or losses are expressed as a percentage of the amount invested. Remember these returns or losses may not include fees, charges or tax.
Income primarily comes from dividends (shares), distributions (managed funds), rent (property), or interest payments (fixed interest and cash). You can expect different levels of income and investment performance from different asset classes. Sometimes there may be a trade-off between higher income produced and the level of capital components.
Capital growth occurs when the value of an investment goes up. You can capture this growth by selling at a higher price than you paid when you bought the investment. Different asset classes can expect varying amounts of growth depending on investment management performance. For example, bonds or cash are a steady conservative investment, while international shares are highly volatile. Generally, a higher potential for growth means higher risk.
Total return is the sum of income from the fund and capital. A positive number means the investment made a profit; a negative number means the investment made a loss. Remember that you won't realise the capital growth component of your investment until you sell. It is also important to note that past investment performance history is not a reliable indicator of future performance.
Learn more about Markets
- What types of investment markets are there?
- How do I invest in different stock markets?
- What is market volatility and how can this affect me?
- What affects share prices?
- How do I understand financial market performance?
Did you know?
The rise and fall of a share price is complex. However, share prices are generally affected by two things, company performance and wider economic conditions.
Most types of investment funds carry different types of benefit and also risk. The right investment fund for you will depend on your financial needs and strategy.
