Glossary
Yield
Yield is the income an investment pays — interest or dividends — expressed as an annual percentage of its price.
A bond paying $40 a year on a $1,000 price yields 4%; a stock paying $2 in dividends at $50 yields 4% as well. Yield is only part of total return, which adds price change — a fund can yield 5% and still lose money, or yield 1% and gain 20%.
Why it matters in practice
Yield is genuinely useful for comparing cash and bond options, where income is most of the return. It becomes dangerous as a shopping criterion: an unusually high yield is usually payment for risk — credit risk in bonds, a falling price in stocks — not free income, and "reaching for yield" is a classic way conservative investors end up in risky assets. Spending only the yield is also no safety rule; total return and sustainable withdrawal rate are the sounder frame.
Related terms: Dividend · Bond · Money Market Fund · Real Return