Total Return Index

Total Return Index

An index of stocks that assumes that all dividends are reinvested in the stocks issuing them. Thus, a total return index is effectively weighted according to how often dividends are distributed and how much they are worth. It is important to note that a total return index is only a statistical calculation and that not all dividends of stocks represented in the index are actually reinvested.

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Total return index. A total return index is an equity market index that's calculated using the assumption that all the dividends that the stocks in the index pay are reinvested in the index as a whole.

Since an index is not an investment, but a statistical computation, the re-investment occurs only on paper, or, more precisely, in a software program.