Difference between YTD Return and Yield

There are a number of individuals, who might have been investing in the market for the very first time. All they want to know is how much money they are going to make on their investment, but what they end up realizing is that their investment generates a completely different number of return and yield. If you look at the financial reports, you will find that the term “yield” and “YTD return” is used differently. It doesn’t indicate the same thing. However, both the terms are used to calculate share growth and value. In order to clearly understand the difference between the two, let’s look at the definition of YTD Return and Yield.

Year-to-Date Return (YTD Return)

Year to Date return or YTD return is a term that is used to describe the financial outcome from the start of the current year till the day these financial results are reported. Normally, January 1st is considered as a start date, but it can be different if the fiscal year of a business is other than January 1st (i.e., if it is December 31st.)

YTD Return is used in financial statements of a business to inform the stakeholders and company management of the current and expected results for the year.

Yield

Yield, on the other hand, refers to the monetary return earned on the financial security or investment. The term yield is used differently for different securities. For example, a yield on a bond or the coupon yield is the annual amount of interest paid on the principal value of the bond, or it can also be a return on your investment based on dividends that are paid out by the companies to their shareholders.

Differences between Yield and Year-to-Date Return (YTD Return)

Following are some of the differences between YTD return and Yield:

Capital Appreciation

Small businesses with a potential to grow in the future usually do not pay dividends. A high yield is typically earned by established businesses and mutual funds that invest in bonds. If, for instance, your yield is 4% or 5%, it means you are investing very conservatively and looking for a steady stream of income instead of capital appreciation.

Whereas, YTD return represents the capital appreciation of the money you invest. Individuals, who are able to make a higher YTD return on their investment portfolio, follow an aggressive approach to investing. Companies keep their focus mainly on the appreciation of stock value rather than distributing the profits as a dividend to the investors.

Comparing the Performance

Although, Yield is the income earned on the investment and it can be used to measure a performance of a company in which you invest, but it doesn’t give a complete picture and is not a reliable measure to make investment decisions as it can be misleading. However, it can be used alongside other measures as a part of the decision making process.

YTD return is often used to compare the result of a current year with the results of previous years in order to measure performance and growth. It allows company management to see if operational activities are being performed as planned or is there any deviation from the plan, and enables them to achieve their target results. For example, if the sales of XYZ Ltd. from January till June 2015 sums up to $1,205,000 and the previous year’s sale value from January till June was $1,800,000, it would alert the company managers to problems and issues in the sales department. Identifying these trends at an early stage allows a business to take corrective actions and keep the sales from plunging. It also enables companies to implement a better strategy and make up for lost profits.

Therefore, despite having a very low yield, you might have a high level of YTD return due to the aggressive trading approach. If you are a young individual between the age of 20 and 40, your focus should be on the YTD return and not the yield, because a yield doesn’t have any worth unless of course, you wish to start supplementing your return with your invested amount.

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