In one of the previous posts, we introduced the Alpholio™ app for Android. This post is the second one in a series covering the app’s services in more detail.
The Total Return service produces charts of total return for multiple securities over a common period. Unlike price returns, total returns account for dividends and other corporate actions of stocks. For mutual funds, this adjustment involves reinvestment of distributions.
To understand why this important, consider this finding from the “Dividend Choices” piece in the August 31, 2011 edition of the S&P The Outlook:
Over the long-term, dividends add significant value to stock. From 1926, dividends represent almost 42% of the total return of the S&P 500.
In that context, you may also want to review the following Wall Street Journal articles:
- Why We Can’t Tell if the Market Is Half Empty or Half Full
- Price Charts Can Mislead
- Dow 1,339,410: The Latest Milestone
To access the service, start the app, open the navigation drawer and tap the Total Return item:
This will open a new screen, on which you can enter inputs for the chart. To expand the Dates and Return Frequency sections, simply tap on each section header:
To modify a ticker, tap on its field and use the pop-up keyboard to edit it. (If you need to find the ticker based on other information, use the Security Lookup service of the app.) To delete a ticker, tap on the Del button on the same line; you will not be able to remove the last remaining ticker. To add a new ticker, tap the Add Ticker button at the bottom of the ticker list.
To change either the From or To date, tap its corresponding button. This will pop up a date selection dialog:
You can either scroll the month, day and year column, or tap on the respective item in the middle row to set it directly. Please note that the From date has to chronologically precede the To date.
Finally, you can select the frequency of returns to match the date range. Monthly returns (a default setting) are less volatile than weekly or daily ones, and will generally produce a smoother graph.
After you specify all parameters, tap the Get Total Return button. If any of your inputs are invalid, you will see a brief pop-up warning. If all settings are acceptable, they will be saved on the device for subsequent use. Please note that to generate the chart, your device must be able to access the Internet.
After the app obtains and processes the data, you should see the following screen:
The first thing you may notice is that the beginning date of the chart is May 30, 2003, and not January 1, 2000 that was specified as the From date in the previous screen. That is because the former date is the earliest possible one on which all three ETFs had a full-month return (the inception date of EEM is April 7, 2003). This is an example of how the app automatically adjusts input dates to provide sensible analysis outcomes in all services.
To zoom in on a portion of the chart, tap the + button or use a spread gesture. To scroll a zoomed-in chart horizontally or vertically, use a corresponding swipe gesture. To zoom out, tap the – button or use a pinch gesture. To immediately restore the chart to its original view, tap the 1:1 button.
The sample total return chart above shows that since mid-2003 the emerging market equities provided a much greater return than that of the developed market or domestic ones, but at the expense of higher volatility. Also, the cumulative return of domestic stocks recently exceeded that of developed market ones.