Total return index (TRI) - Financial definition
Concise definition of the term total return index
A total return index is an index that measures the performance of a group of components by assuming that all cash distributions are reinvested, in addition to tracking the components' price movements.
Comprehensive definition of the term total return index
A total return index (TRI) is different from a price return index. A price return index only considers price movements (capital gains or losses) of the securities that make up the index, while a total return index includes dividends, interest, rights offerings, and other distributions realized over a given period of time. Looking at an index's total return is usually considered a more accurate measure of performance.
Typically, taxation is different between capital gains and dividends, so that the total return index only forms a rough approximation of what a long-term investor can expect to keep after taxation.
While it is common to refer to equity-based indices, there are also total return indices for bonds and commodities.