Yield

Yield

This is the potential income return on an investment, such as shares, bonds and funds. It's usually shown as an annual percentage. For example, if you buy shares in a company worth £1,000 and you receive a dividend of £20, the yield is 2%.

The yield changes with share price movements - a rising share price reduces the yield and vice versa. It also depends on the generosity of the company: the board can cut the dividend when times are tough, meaning a lower yield (boo!). But (and this is the good bit) companies are aiming to steadily grow dividends over time. So you buy shares in that company today, earning a £2 dividend or 4% yield. Then it doubles its dividends over three years. By then, you'd be earning 8% a year from your original investment. Nice.

With bonds, the yield is the bond's annual interest rate expressed as a percentage of its current market price.

 
 
Risk

Risk

Volatility

Volatility

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