Yield and Return | srei
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Yield and Return

The return (in terms of percentage) paid on an instrument in the form of dividend or interest is called Yield. Based on the kind of investment, there are many different kinds of yields. In the debt markets, yield to maturity (YTM) is the most popular measure to quantify the rate of return paid on a fixed income instrument.

Return is the amount of money your investment increases in value, plus the money you earn on the investment. While both terms are often used to describe the performance of an investment, yield and return are not one and the same thing.. Return also referes to total return that what an investor has actually earned on an investment during a certain period of time in the past. Return generally takes into account interest, capital gain (such as increase of share price) and dividends. In other words, return is retrospective, or backward-looking. It describes what an investment has concretely earned. In contrast to Return, Yield is prospective or advanced looking. Yield measures income like interest and dividends that an investment earns and ignores capital gains. This income is taken in the context of a certain time period and then annualized, with the assumption that the interest or dividends will continue to be received at the same rate. Yield is often used to measure bond or debt performance; in most cases, total return will not be the same as the quoted yield due to fluctuations in price.