Yield

Yield represents the income generated by an investment over a period of time, expressed as a percentage. For bonds, yield measures the interest income relative to the bond's price. For stocks, dividend yield measures annual dividends relative to the stock price.

Different yield calculations serve different purposes. Current yield divides annual income by current market price. Yield to maturity (YTM) calculates the total return if a bond is held until it matures. Yield to call considers the possibility of early redemption. Distribution yield measures the income from a mutual fund or ETF.

Yield and price move inversely for fixed-income investments. When bond prices rise, yields fall, and vice versa. This relationship is fundamental to understanding how interest rate changes affect bond portfolios. Yield-seeking investors must balance the desire for higher income against the increased credit and duration risk that typically accompanies higher yields.