Share:
Indices
TR, PR, NR or GR: What you need to know about the index abbreviations
Perhaps the many different abbreviations such as TR, PR, NR and GR in indices have already caused confusion for you. You are not alone. Specifically, index providers like MSCI use such abbreviations. What many mistakenly consider to be irrelevant technical details are actually significant pieces of information.
TR indices such as the DAX (which is the German stock index) are exotic:
TR stands for Total Return and generally refers to the total amount over a specific period. This includes all income sources from the securities in the index. In addition to the pure price development, this also includes dividends and interest income from the securities in the index. The DAX is a TR index. This is also referred to as a performance index. In the case of a Price-Return-Index (PR), all interest and dividends are ignored. The focus in the PR method is exclusively on price movements. However, the German index is considered exotic on an international scale. Almost all other indices worldwide are calculated using this method as so-called price or price indices.
For ETFs and funds, pay attention to the correct benchmark index:
You should never compare a performance index like the DAX with a price index such as the US S&P 500 index, the differences are enormous! Even more important: Anyone who wants to know how good a fund or an ETF is usually compares its performance with the development of an index (benchmark). Do not compare apples to oranges here! The benchmark index must fit the fund. A fund or ETF always follows the TR method. This means that as an investor, you receive the income from the securities contained in the index, regardless of whether the fund is accumulating or distributing. An ETF on the US S&P 500 index, for example, shows far better performance than the index itself, because it is calculated using the PR method, but also includes the dividends in the ETF.
The facts:
- TR (Total Return) corresponds to the performance index (with dividends).
- PR (Price Return) corresponds to the price or price index (without dividends) (also STDR).
- NR (Net Return) modification of the TR approach: the tax on dividends from local companies is deducted. For example, the index provider MSCI uses this approach (also NDTR).
- GR (Gross Return): Here, the gross return is used without deducting taxes (also GDTR).
Our Conclusion:
Do not be misled if a fund provider compares the performance of his fund with the price development of a PR index or price index. Then it will always perform better – and significantly so! According to a study by Ibbotson Associates, the S&P 500 has achieved a performance of 9.98 percent per year since 1926. However, only 5.72 percent was attributed to the development of stock prices, the rest was due to dividend distributions. Nevertheless, for investors, the 9.98 percent is crucial.
Our Products:
(click to learn more)
Newsletter
Subscribe to our newsletter and receive exclusive content such as compact analyses, investment ideas and more!
Service & Info
Payment
We accept all major credit cards, PayPal and cryptocurrencies.