Gross Yield
Candlefocus EditorSimply put, Gross Yield is the total amount of money generated by an investment without deducting any taxes or expenses. The most common types of investments that are measured by their gross yield are bonds, mutual funds and rental properties. Calculating Gross Yield is easy if you start with the total income a certain investment generates, then deduct the taxes and expenses associated with it.
For example, the gross yield on a bond can be determined by looking at the total amount of interest that the bond pays over a period of time and then deducting the taxes and expenses associated with the bond. The same type of calculation can be used in regards to a mutual fund or rental property. The total income from the investment (rent payments, if applicable) minus all taxes and expenses will provide an investment's Gross Yield.
By contrast, the term “Net Yield” represents the actual return to an investor after all taxes and expenses have been accounted for. In other words, the Net Yield is the Gross Yield minus the taxes and expenses associated with the investment.
When comparing the relative returns of different investments, it is important to remember that the Gross Yield will often be higher than the Net Yield. This is because taxes and expenses take away from the total return. Therefore, when attempting to compare the returns of various investments, it is important to perform the calculations using both Gross Yield and Net Yield to get an accurate picture of their relative strengths.
Overall, Gross Yield is a valuable financial tool that can be used to compare the relative returns of different investments. Determining the Gross Yield can be done easily by simply subtracting taxes and expenses from the total return. However, it is important to remember that the Net Yield is the actual return to the investor after taxes and expenses have been accounted for. Knowing both Gross Yield and Net Yield can provide an accurate picture of the relative strengths, and weaknesses of different investments.