Put all parts of the result together
Suppose a fictional investment costs $500, later has a value of $520 and has paid $15 in cash during the period. Ignoring costs and taxes, the combined gain is $35: $20 of value change plus $15 of income. Relative to the original $500, that is a 7% return.
A price-only calculation would show 4%, because it considers only the $20 change. Neither calculation should be labelled without explaining what it includes. FINRA's discussion of return distinguishes investment income from changes in value and combines them when considering total return.
Now change the ending value to $470. The $15 income would leave a combined loss of $15, or 3% of the starting amount. Receiving a distribution does not guarantee a positive total result.
Avoid counting income twice
If a statement's ending balance already includes cash distributions, do not add them again. Similarly, a published total-return chart may assume distributions were reinvested. Adding the income separately to that chart's result would double count it.
Use a small reconciliation: starting value, external money added or withdrawn, income, costs and ending value. Identify where each item appears in the provider's presentation. Money transferred into the account is not investment profit, even though it increases the balance.
Keep the time period consistent
A 7% result over six months and 7% over three years are not equivalent experiences. Record the start and end dates before comparing returns. Annualising a result introduces a calculation about a yearly equivalent; it does not mean that rate was earned smoothly each year or will continue.
The simple example here assumes no additional contributions or withdrawals. Multiple cash flows require a method that accounts for their timing. Do not divide a change in balance by the opening balance and call it performance when substantial new money entered halfway through.
For each return figure, ask four questions: does it include income, does it include costs, does it include taxes, and what period does it cover? Those labels make the number usable. Without them, two accurate figures can still create a misleading comparison because they measure different things.
