how gross yield works
gross yield is a measurement used for many investments including real estate fixed income and mutual funds but it is only one way to measure the return on an investment in the case of some investments such as rental property the difference between gross and net yields can be significant since the income can be substantially eroded by operating expenses such as maintenance expenditures insurance and property taxes mutual fund investors need to carefully watch the difference between the gross and net yields on their investments in order to be certain that fund management fees and brokerage fees or both are not taking a big bite out of their real returns 1types of yieldscommon types of yields include nominal yield current yield and yield to maturity ytm nominal yield is the coupon rate on a bond divided by its par value it is the interest rate that a bond issuer promises to pay bond purchasers the nominal rate is fixed and applies for the entire life of the bond it may also be called the nominal rate coupon yield or coupon rate the current yield of a bond equals its annual earnings or dividends divided by its current market price the current yield represents the return an investor would expect if the owner purchased the bond and held it for one full year yield to maturity ytm is slightly more complex this is the total return that a bond is anticipated to earn if it is held until it matures ytm is a long term bond s yield expressed as an annual rate it can be thought of as the internal rate of return irr of a bond if the investor holds the bond until maturity and receives all payments as scheduled yield to maturity is also called the book yield or redemption yield mutual fund yieldsmutual fund yields are reported in two ways dividend yield and sec yield dividend yields are expressed as an annual percentage of a fund s portfolio income also based on the net income received after the fund s associated expenses have been paid the sec yield is based on the yields reported by particular companies as required by the securities and exchange commission sec this is based on an assumption that all of the associated securities are held until maturity 2