The Globe and Mail reports in its Saturday edition that exchange-traded funds and mutual funds report their returns after fees, with all distributions assumed to have been reinvested in additional units. In a Globe special, John Heinzl writes that similarly, when a fund company provides a benchmark return for comparison -- usually the S&P/TSX Composite Index -- it is a total return with dividends reinvested. Standardizing returns in this way allows for apples-to-apples comparisons between funds and with indexes.
Unfortunately, not all ETF companies thoroughly explain what their returns measure, which leads to confusion. Bank of Montreal and Vanguard Canada, for instance, refer to the change in net asset value (NAV) or "market price" of their ETFs, which may lead some investors to believe, incorrectly, that dividends are not included.
Mr. Heinzl says that BlackRock Canada does a better job with its iShares ETFs. Its ETF performance tables include a clickable information button that brings up the following text, "Total return represents changes to the NAV and accounts for distributions from the fund."
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