Gross total return refers to the total return on an investment before the deduction of any fees or expenses. It includes all forms of returns, such as capital gains, interest and dividends. Gross total return is calculated by taking the ending value of the investment, adding back any distributions (like dividends or interest), and then dividing by the initial value of the investment. It's expressed as a percentage to indicate the total growth of the investment.
Gross total return is a comprehensive measure of investment performance, as it accounts for all sources of returns. It's particularly useful for comparing the performance of different investments on a pre-expense basis. Gross total return provides a clear picture of an investment’s growth potential, which can be crucial for initial investment decisions.
While gross total return can be an important metric, investors should also consider net returns, which factor in fees and expenses. High gross returns might be significantly reduced after accounting for management fees, performance fees and other costs associated with an investment. Therefore, for a complete understanding of what an investor might actually earn, both gross total return and net returns should be considered in conjunction.
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