Return of capital

Return of capital (ROC) — the portion of a fund’s distribution that isn’t earnings or harvested premium but your own principal handed back on a schedule. NAV falls by exactly that amount. US funds must disclose the breakdown (look for ROC in distribution notices) — a “12% yield” that is one-third ROC is a 12% headline doing 8% of work. The first question in the lesson’s decomposition checklist: what is the distribution made of?

First used in: 2.4 · Yield is not free money