# How are average annual returns calculated on an index fund?

I am trying to understand the average annual returns on this index fund: VFTSX according to its data on Vanguard's Price & Performance page.

It shows, under "Average annual returns", the following table: which shows a 1 year return of 10.24%

I am looking at my account history for this fund, and I am trying to figure out how the math was done to come up with a 1 year return of 10.24% mentioned above.

Here are my dividends for VFTSX over the year of 2016: • 3/16/16: $109.40 • 6/16/16:$101.88
• 9/16/16: $101.05 • 12/23/16:$120.87

I looked at my account balances by date for VFTSX and saw:

• 3/15/16: $25,540.33 • 6/15/16:$26,248.94
• 9/15/16: $21,175.42 • 12/15/16:$23,140.86

Averaging those four balances out comes up with ($25,540.33 +$26,248.94 + $21,175.42 +$23,140.86) / 4 = $24,026.39 The sum of the dividends is$433.20

As a percentage of my "average" balance for the year, the dividends come to $433.20 /$24,026.39 = .018

So that's 1.8%, which I am trying to compare to the 10.24% from Vanguard's reported "average annual returns". This fund has an expense ratio of 0.22%, but that is nothing compared to how far off these two percentages are. I sense I am missing something very fundamental in how "average annual returns" is calculated. What am I doing wrong?

These are approximate numbers, but suppose the fund opened at $13.16 per share on Jan 1, 2016, and by Dec 31, 2016 it closed at$14.26. It also paid out 4 dividends throughout the year: 0.076+0.066+0.051+0.055 = $0.248. The return is (14.26 + 0.248)/13.16 = 10.24% If you bought 1500 shares on Jan 1, it would have cost you $13.16*1500 = $19740. During the year those 1500 shares would have paid out$372 in dividends, and at the end of the year they would be worth $14.26*1500 =$21390. So your investment has increased in value by $1650 and you've earned$372 from it over the course of the year, for a total return of $2022, which is 10.24% of the$19740 initially invested.