Expert: Doug Ingram - 6/8/2003

Question
Hello,

Thank you very much, first of all, for taking my question.

I'm fairly new to the mutual fund investment world and sort of confused as to  the definitions of “total returns” and “total expense ratios” on mutual funds.

Does the “total return” reflect the decrease in price per share of the mutual fund and/or the expense ratio for the fund? In other words, if I had an 11% gain because of dividends/interest on a fund but the fund went down in price 10% and had an expense ratio of 1%, would the “total return” then be 0 %?

Also, how is the “total expense ratio” deducted from mutual funds investments. Is it deducted from the price of a share of the mutual fund at the end of the year? Or is deducted from what the fund returned in dividends/interest?

Thank you very much,
Atam


Answer
You are basically right.  Total Return takes into account not only the coupon or dividend yield, but also the market price change.
That's why bonds yielding only 4 to 5% made 13 to 15% last year.  (The price appreciation!)
Total return is the proper outlook on investing.

I don't know that much about mutual fund expenses.  You might try www.morningstar.com

I also use that site to compare funds and sectors for past performance and management quality.