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Bond Funds
Old 12-19-2005, 08:00 PM   #1
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Bond Funds

Can someone give me a simple explanation of the difference between return and yield on a bond fund?

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Re: Bond Funds
Old 12-19-2005, 08:18 PM   #2
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Re: Bond Funds

Return includes short-term gains and losses.

Yield expresses a bond's "return" if held to maturity.

Example: If you buy a bond on Jan 1 yielding 5% and interest rates go down by year end, your 1 year return (coupon plus capital gain) will be greater than 5%. But if you hold that bond to maturity your return for all periods will be 5%, equal to its original yield.
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