Put the remaining holding and income in one account.
Together €104 · 4% total return
↓ Separate €1 account charge leaves the cash
Together €103 · 3% after the charge, no other personal costs/tax
Count the distribution once. Adding it to an income-inclusive return overstates results; deducting expenses already in NAV understates them. Over several periods, spending income differs from reinvesting it.
Reconcile the cash and unit after the separate charge
The NAV-only change is −2%. Adding the €6 distribution gives 4%; the separate €1 charge reduces this to 3%. This is an accounting example, not a typical yield or tax outcome.
“Net” of which deduction?
- Net total-return index
- Included: reinvested distributions after specified withholding.
Not established: fund charges, dealing costs, your final tax. - Fund NAV return
- Included: expenses and taxes reflected in this fund's NAV.
Not established: your execution price, account charges, personal tax. - Your result
- Reconcile actual holdings, flows, costs and tax. Deduct only items not already reflected.
Index withholding is not the investor’s final tax
MSCI’s February 2026 methodology distinguishes price, gross and net daily total-return series. Specified withholding-tax assumptions apply to distributions, not fund expenses or every residence, domicile and account’s final obligations.
The owner’s execution can differ from NAV.
- 1 January 2026 · separate one-off account charge€9,000 − €90 → €8,910€90 leaves the account. No other execution costs or flows are modelled. The charge is an exercise premise, not a typical fee.
- Nominal result · compare with initial €9,000€8,910 ÷ €9,000 − 1 = −1%
- Purchasing power · divide by the basket ratio€8,910 ÷ 1.10 → €8,100In 1 January 2024 euros: €8,100 ÷ €9,000 − 1 = −10% real return.
Do not add −1% and −9.09%: the adjustments multiply. Do not deduct underlying expenses or add distributions again. Personal tax is unmodelled, so this is not the owner's personal after-tax result.
H-4 carries over from the previous lesson. The €100 unit/distribution example above and the €10,000 contribution example below are separate accounting illustrations. ETF premiums/discounts, spreads and commissions can separate a market-price result from NAV performance.
For borrowing/derivatives, treat financing and collateral income consistently. A research series omitting financing is not directly comparable with a holding paying it; a general chart rarely reproduces every investor’s after-tax result.
The contributed €4,000 is not profit.
- Opening €10,000
- Contribution €4,000
- Gain €500
The €4,500 balance increase contains €4,000 supplied by the owner.
Calling this a 45% return counts supplied capital as gain. A rate needs flow dates: time-weighted return separates external flow effects; money-weighted return reflects amounts/timing. One initial lump-sum model does not describe monthly saving or withdrawals during losses.
Reconcile money before choosing a reporting method
€14,500 − €10,000 − €4,000 = €500. GIPS distinguishes time-weighted and money-weighted reporting; differing flows can change investor experience without proving poor selection.
Where does simulation end and live history begin?
Separate back-calculated history, index launch and the fund’s actual record. Reconstructed prices, reinvestment or access may be difficult to achieve. The SEC distinguishes backtests from actual performance; joining segments must not imply money followed the rules throughout.
Unmatched market, dates, currency, risk, income, deductions or flows leave the comparison unresolved. The next lesson’s one-year euro A/B/C/D cohort is a separate fictional record; its letters do not identify H-4’s dollar accounts.
Complete a different fictional record: 1 January 2024 → 1 January 2026, euro account €5,000 → €5,500, total return with distributions reinvested and ongoing fund costs already included. A separate €50 charge is paid at the end; the spending basket rises 10%. No flows, other costs or tax. Write the definition record, nominal end amount/return and end amount/return in initial euros. Name what the endpoints leave unknown.
Check the definition and both results
Definition: invented single euro account, two exact years, reinvested distributions, ongoing fund costs included, separate end charge, basket +10%, no flows/other costs/tax; not an observed live or backtest series. €5,500 − €50 = €5,450 nominal, or +9% against €5,000. €5,450 ÷ 1.10 ≈ €4,954.55 in initial euros, or about −0.91% real. Do not add distributions again or subtract included costs twice. The record establishes neither annual/intraperiod paths, other markets nor future returns.