Community Forex Questions
Yield vs return
Yield and return should be used in tandem to assess an investment's overall performance.
Consider the earlier stock XYZ example. Assume XYZ shares have lost value over the year and are now worth $45 each. That investment would have returned a negative total return of $300, or 6% ($200 in dividends - $500 in principal). However, the yield remained unchanged. Even so, you received $200 in dividend income.
Investing in stocks based on their yield may eliminate the need to sell shares to generate income. This can help you avoid selling shares at a loss during a market downturn.
Return can be used to evaluate individual investments as well as an entire portfolio. This can aid in determining overall performance and determining whether certain underperforming investments should be sold and the proceeds reinvested elsewhere.
Consider the earlier stock XYZ example. Assume XYZ shares have lost value over the year and are now worth $45 each. That investment would have returned a negative total return of $300, or 6% ($200 in dividends - $500 in principal). However, the yield remained unchanged. Even so, you received $200 in dividend income.
Investing in stocks based on their yield may eliminate the need to sell shares to generate income. This can help you avoid selling shares at a loss during a market downturn.
Return can be used to evaluate individual investments as well as an entire portfolio. This can aid in determining overall performance and determining whether certain underperforming investments should be sold and the proceeds reinvested elsewhere.
Yield and return are financial metrics used to assess the performance of investments but differ in their calculations and implications. Yield measures the income generated from an investment, such as interest or dividends, expressed as a percentage of the investment's current or purchase price. It's often used for bonds and dividend-paying stocks, providing a snapshot of expected earnings.
Return, on the other hand, encompasses the total gain or loss from an investment, including income and capital appreciation, over a specific period. It is usually expressed as a percentage of the initial investment cost. While yield focuses on income, return gives a comprehensive view of an investment's profitability, considering both income and changes in value.
Return, on the other hand, encompasses the total gain or loss from an investment, including income and capital appreciation, over a specific period. It is usually expressed as a percentage of the initial investment cost. While yield focuses on income, return gives a comprehensive view of an investment's profitability, considering both income and changes in value.
Feb 21, 2023 06:59