Compare Returns Before Investing

When shopping for an investment, you should compare the return of the various unit trusts. Do not be misled by an attractive potential returns that are being promised. Look and compare past performance of the various unit trusts. To be on the safe side, look for unit trusts that have been in the market for more than 10 years. Let us understand some of the returns.

Total Return
Total return measures the amount of capital appreciation or depreciation plus any income yield over a period of time, inclusive of unit splits if any.

Average Annual Return
Average annual return is total return for a period of more than a year divided by the number of years involved. For example if your investment has increased by 60% over five years, that represents an annual average return of 12% per annum.

Compound Annual Return
Compound annual return is the growth in value each year as percentage of the value at the beginning of the year plus any accumulated earnings.

Real Return
Real return refers to your net return after adjusting for inflation. Real return shows investors whether their wealth has increased in terms of purchasing power. For example, if the return on your investment is 6% and the current inflation rate is 4%, your real return is 2%.

Inflation is the evil in the economic of the purchasing power. Choose therefore unit trust that has return far much higher than the inflation rate.