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# Total Return Definition, Calculation and Quiz

A starting point when evaluating active performance is to break total return into two pieces.
1. Define - Learn about total return on investments.
2. Context - Use total return in a sentence.
3. Quiz - Test yourself.
Updated: February 18, 2021
While basic addition confuses no one, it's surprising how often active, benchmark and total returns are discussed. See more below.

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## Using Total Return for Performance Measurement

Beginner

Total Return represents the percent return for an individual security or portfolio for a stated time period. For portfolio performance measurement it is a starting point for analyzing returns attributed to active management.

Synonym: absolute return

Mathematically, total return is the sum of the benchmark return and the active return. With two inputs you can easily solve for the third.

• Total Return = Benchmark Return + Active Return

For context, when active portfolio managers compete with benchmarks, it's common to refer to all three components quickly and interchangeably. Portfolio managers are motivated by, and hope to achieve, slight and consistent 1% to 2% wins against their benchmark monthly to offset periods when they fall behind. Every portfolio manager knows the status of these metrics, which illustrates their importance.

### In a Sentence

Kay:  Quickly, if the fund's total return and active return were the same, what was the benchmark return?
Ann:  The benchmark was flat.

### Video

Many terms have 4-5 minute videos showing a derivation and explanation. If this term had one, it would appear here.

Videos can also be accessed from our YouTube Channel.

### Video Script

If this term had a video, the script would be here.

### Quiz

Click box for answer.

Benchmark return minus active return is total return? | True or False?

False

Quickly, a 10% total return when the active return was 1% means the benchmark return was? | 1% or 9% or 10% or 11%?

9%

#### Questions or Comments?

Still unclear on Total Return? Check out the Quant 101 Series of 27 free Excel tutorials on financial modeling.

### Related Terms

Our trained humans found other terms in the category performance basics you may find helpful.

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