how is yield computed for a mutual fund?
- DavidK93Lv 71 decade agoFavorite Answer
It's the interest rate, divided by the number of compounding periods in a year, and then (after being summed with 1) raised to that power. For example, if the fund has an interest rate of 3% and is compounded monthly, first you divide by 12 to get .25%. Then you raise 1.0025 (that is, 100.25%) to the 12th power, getting 1.0304. So the yield is 3.04%. Yield is always a little bit higher than the interest rate. The more frequently the interest is compounded, the wider the gap.
- hayharbrLv 71 decade ago
What they do basically is take all the dividends paid by the stocks in their portfolio and average them out. Some stocks, like typical internet stocks, don't have dividends and others have quite nice ones. So an internet fund's yield will be lower than an energy fund's yield because the stocks in the fund pay little or no dividend.
Nice avatar David K!