Understanding M*’s Total Return and Investor Return

Back in last October, Morningstar started to offer a new gauge to measure how average investors fared over a certain period of time when investing in open-end mutual funds or ETFs. The new gauge is called Investor Return, also known as dollar-weighted return, which takes into account the total cash inflows and outflows.Before, Morningstar only has total return data.

So how exactly is invest return calculated and what's the difference between investor return and total return? To illustrate, consider one mutual fund X, which has the following net assets and monthly cash flows (the data are from Morningstar document, page 7).

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