I'm new to stocks, and trying to determine the historic behaviour of a particular ETF. However, I find that the stock price chart viewable on my investing site and the stock performance listed in the ETF report tell different stories.
I think the reason for this is because I'm misunderstanding the exact nature of the two charts.
For CBO:TSX, this is the stock price chart:
And this is the performance chart from the analysis report:
For someone who doesn't understand how these charts work, this can be a little confusing. The stock price appears to go down, looking like the ETF has done worse and is worth less than it previously was. However, the $10,000 initial investment has clearly grown in the performance chart.
My intuition is that the stock price varies downward because:
- Dividend payouts affect the stock price negatively
- They have increased the number of shares available, reducing the stock price
My intuition is that the performance chart is high because:
- The $10,000 initial investment assumes the dividends are reinvested
How correct is my line of thinking? If a person is looking to make an investment based on the historical behaviour, isn't the stock price chart almost useless when looking at the long run then? Should I mostly be looking at the performance chart for long term investments?
