How to Increase Investment Returns: A Guide to Understanding Yield for Investors

In an era where investors face complex markets, the ability to analyze and calculate rates of return has become an essential skill. This article will present in-depth knowledge about Yield in an easy-to-understand way to help investors make informed decisions.

Yield: Meaning and Calculation

Yield is the rate of return that shows how much income your investment can generate. It is usually expressed as a percentage per year, whether investing in bonds, stocks, or other assets.

Basic Method to Calculate Yield

For bond investments, the simplest way to calculate yield is:

Yield = ((Current Price – Purchase Price) / Purchase Price) × 100%

For example, if you buy a bond worth 1,000 THB with a 5% interest rate for 5 years, the annual return will be 5% per year.

Common types of yield include:

• Dividend Yield: Income from dividends received by shareholders
• Bond Yield: Income from fixed-income securities: interest from holding bonds
• Real Estate Yield: Income from property: rental income

Factors Determining the Level of Return

( 1. Investment Type

Investing in bonds typically yields lower returns but with less risk, while stocks may offer higher returns but with greater risk. Choosing an investment suitable for your risk profile is crucial.

) 2. Economic and Market Conditions

Interest rates set by banks, economic conditions, and political factors influence the returns you will receive. Analyzing these factors is fundamental in estimating expected yield.

( 3. Investment Duration

Longer investment periods often yield higher returns due to the power of compound interest. Investors with longer horizons can expect greater returns.

) 4. Risk Level

The basic principle is that higher risk must be compensated with higher returns. Investments with greater risk should have higher yields to offset that risk.

( 5. Company Management Policies

Decisions on dividend payouts, development investments, or debt issuance strategies all affect yield determination.

Types of Yield Investors Should Know

) Dividend Yield: Benefits from Shareholding

Dividend Yield is calculated by dividing dividends by the current stock price. For example, Company A pays 10 THB in dividends per share, and the current stock price is 100 THB, so Dividend Yield = ###10 ÷ 100### × 100 = 10% per year.

Earnings Yield: Return from Net Profit

This yield is calculated by dividing net profit per share by the current stock price. If Company B has a net profit of 5 THB per share and a stock price of 50 THB, the return is ###5 ÷ 50### × 100 = 10%.

Bond Yield: Return from Fixed Income Securities

Bond Yield indicates the expected annual return from holding bonds, calculated from interest relative to the current price. Example: a 1,000 THB bond with a 5% interest rate yields 5% per year.

( Mutual Funds Yield: Return from Mutual Funds

Mutual funds generate income from two sources: dividends from held stocks and interest from bonds. For example, if Fund A has total income of 100 THB and net asset value of 1,000 THB, the return = )100 ÷ 1,000### × 100 = 10%.

Yield in the Stock Market: Investment Comparison Tool

In the stock market, there are two main yield indicators:

Dividend Yield: Shows the percentage return from dividends relative to the current stock price. Suitable for investors seeking regular income from holding stocks.

Earnings Yield: Shows the return from the company’s profits. Suitable for assessing true valuation, as earnings yield provides a more comprehensive picture than just the actual dividends paid.

Understanding yield helps you compare different assets and select those aligned with your goals and risk tolerance.

Yield vs. Return: Key Differences

Yield refers to the expected or announced return in advance, excluding asset price changes.

Return refers to the actual return received, including income (dividends, interest), and gains/losses from price changes.

Example: A stock with a dividend yield of 5% may give a total return of 15% if the stock price increases, or -5% if the stock price declines.

Which Assets Generate the Highest Income?

There is no universal answer, as it depends on your financial status and goals:

Stocks: Offer high long-term returns but with high risk. Suitable for investors willing to accept volatility.

Real Estate: Provides moderate to high returns with medium risk. Suitable for investors with sufficient capital.

Bonds: Offer lower but stable returns with low risk. Suitable for those seeking security.

Mutual Funds: Vary depending on policy; ideal for beginners seeking diversification.

Gold and Commodities: Provide moderate returns; good for risk hedging.

Cryptocurrencies: Offer very high returns but with very high risk. Suitable for investors with deep understanding and patience.

Summary: How to Calculate Yield for Better Investment Decisions

Yield is an indispensable tool in investment planning. Whether investing in stocks, bonds, real estate, or mutual funds, understanding how much income can be generated helps you compare opportunities effectively.

The key to successful investing is balancing expected returns (yield) with acceptable risk, and choosing an investment horizon aligned with your goals. By thoroughly understanding yield, you can build a more efficient portfolio and generate sustainable income as desired.