What Is a Historical Yield?
A historical yield is a measure of return on investments over time. It is possible to use this data to construct a yield curve that provides information about performance over one, three, five, or more years. This can be important for investment research as well as annual reports and other disclosures. Financial publications often include historical yield data, as do informational brochures put out by investment companies, mutual funds, and similar entities.
A single snapshot of yield does not provide very much information. If an investor looks at a mutual fund and the return is five percent, for example, the investor does not know if this is a good or bad rate. It might be excellent compared to historical yield, or it might be very poor. Likewise with other investments, particularly pooled investments that involve a mixture of assets that may perform at different rates. More information is necessary to determine whether a yield is a sign of bad or good performance.
With historical yield data, an investor can see how investments performed over a given period of time. This provides important information about current and projected performance. A mutual fund might provide returns that could fluctuate considerably over time, but may average out to a reasonable level. Conversely, a dip in historical yield might suggest a fund is poorly managed, and may not be a good investment. The fund may also perform much higher than similar investments.
Investors doing research to prepare for new purchases can collect historical yield information, including curves, spreads, and charts. These figures can show the level of volatility in the investment. It can be helpful to compare this information against market performance and comparable investments to add even more context. If a mutual fund did well in a downturn, for instance, it suggests that the manager knows how to handle a variety of economic conditions. Consistent above average performance can indicate a potentially sound investment that will yield good returns over time.
Some investors enjoy may prefer to do their math independently to examine their options. Others may prefer to have this information prepared for them. A number of resources provide historical yield curves and other data for individual investments and the market as a whole. These include trade publications, annual reports, and investment education sites. It is also possible to pay a financial analyst to prepare recommendations and historical background for the benefit of a researcher.
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