Money Market Mutual Funds are one of the instruments that investors are interested in. Mutual Fund investment becomes an option because of the low risk and relatively safe. Moreover, this type of investment has flexibility and practicality.
Even so, there are some things that need to be known to invest in Mutual Funds. One of the important terms to consider when investing is average yield.
What is average yield? This term needs to be known to evaluate the performance of Mutual Funds and determine the right instrument. For that, let's find out more about average yield which will be discussed in this article.
Average Yield, Important Term in Mutual Fund Investment
Investing needs to be accompanied by knowledge of important terms so that the chosen instrument and the benefits gained are according to plan. So, what is average yield?
Average yield is an indication of profit or is interpreted as a return on holding assets, portfolios, or assets that you have in Mutual Funds if the Investment Manager manages a portfolio until maturity.
Returns have a certain time during which they can increase, stabilize, or decrease. This period usually corresponds to one billing period, for example once a year.
Yield fluctuations occur any time depending on the market. Investors should monitor these fluctuations carefully. Otherwise, investors can suffer losses.
The higher the yield value makes the profit or indication of return more attractive. Average yield can also be interpreted as the total value of all interest, dividends, and other income from investment which is then divided by the age or period of investment.
The average yield value does not indicate certainty of profit or return. This is because it can change over time. Changes in average yield can occur if the Investment Manager changes the Mutual Fund investment portfolio to regulate liquidity. This change can occur if the disposal or sale of assets in the portfolio is carried out before maturity.
Average yield is important for evaluating investments, such as Money Market Mutual Funds or Bonds. You can use the highest average yield value as a reference in choosing investment instruments.
Difference between Average Yield and Return
In choosing a Mutual Fund product, you also need to consider the average yield and return. For example, Money Market Mutual Funds.
What is a Money Market Mutual Fund? This Mutual Fund is a type of instrument in which the entire fund allocation (100%) is invested in money market instruments.
The terms average yield and return refer to profits. However, both have differences that need to be understood. This is to avoid misinformation when selecting Mutual Fund instruments. For that, let's read through the differences in the following explanation.
- Average Yields
As already explained, the average yield shows an indication of profit. This value shows the performance of an ongoing Mutual Fund. The nature of the average yield value is uncertain and may change due to several factors.
The average yield for Mutual Fund products is a reference that is always related to product portfolio development, which is still uncertain.
Meanwhile, the average value of product returns changes every month according to the portfolio updates of the Investment Manager who manages them.
Returns are usually given as a percentage, which is measured by the value of the investment and the market value of the securities or assets held. The higher the performance, the higher the interest of investors.
It should be emphasized that average yield is not a guaranteed return, as fund managers can sell assets to manage liquidity and change investment strategies according to market dynamics. There is also a fee from the portfolio manager.
The average yield should be used in conjunction with other factors when evaluating Bonds or other types of Mutual Funds regarding the duration and quality of assets.
Average yield can be used as a reference for investors who focus on generating income from an investment. Understanding average yield can help understand risk and make the right decisions when investing. The higher the value is also accompanied by a comparable risk of loss.
- Returns
Just like the average yield, return is also important for evaluating and choosing the investment. In Mutual Funds, the term return refers to the past performance of a fund's products over a certain period.
The return value itself can only change according to the benefits received and realized. Return can also be realized as net income after taking into account administrative costs, taxes and inflation.
In simple terms, return is the change in the price of an asset, investment, or project over a certain period, which can be expressed as a price difference or a percentage.
In terms of investment, performance is assessed by return, which is regulated by the fund manager based on the value of investment capital and is updated every trading day.
Simply put, return is received by investors from their investments. In addition, returns do not always move in a positive direction, but can also move in a negative direction.
In the investment context, it can be said that return is the reward received by investors for the risks they take. Therefore, the term "high risk, high return" is often used in the world of investment and business.
Nominal return is expressed as the change in the monetary value of the investment over time.
Return is also influenced by several things, such as interest rates and liquidity. An increase in interest rates reduces the present value of future income. This condition also lowers asset prices in the capital market.
Meanwhile, liquidity risk is related to the secondary market for trading investment instruments. Highly liquid assets are those that are sold or bought quickly without a change in price.
There are two types of returns that must be known before investing, namely expected returns (expectations) and realized returns.
Expected return is the type of return that investors will receive in the future. So this income is income that has not been received. As the name suggests, it can be said that this is the expected return.
Unlike expected returns, realized returns are returns that have been realized. Profits can be a reference for investors to make investment decisions or not.
This realized return also makes it easier for investors to estimate the expected amount or percentage of return in the future.
The rate of return obtained from investment activities is directly related to the growth of the funds or companies where investors invest their funds.
That is the difference and explanation of average yield and return. In conclusion, the average yield is an indication of uncertain profits and can change. While return is the performance of an investment. This value may change based on the benefits obtained from Mutual Fund products.
After knowing the differences, there are also types of annual average yields that need to be understood. So that the investment strategy can run as expected.
Understanding Average Annual Yield
Average annual yield is a very important term for investments where interest rates change frequently. Average annual yields can also apply to many other investments, from savings accounts to Mutual Funds, commodities, or real estate.
As previously explained, this term refers to the profit or return from an investment activity divided by the investment period. Knowing the average yield information is useful when analysing the potential yield on an investment product, especially in the case of floating interest rates.
In general, the average annual yield determines the performance of a multi-year investment over time. Thus, investors can consider the potential for investment products even though the value of capital or interest rates change from time to time.
An example of implementing average yield can be found in a floating-rate savings account. The average annual yield value can be calculated by adding up all the income or interest payments for a given period and dividing by the average total principal in the current year.
The average annual yield value can also be used as a useful measure of determining the real yield on an investment vehicle. In general, this term can indicate the yield of an investment vehicle from time to time for several years at a time.
That's an explanation of average yield, return, and annual average yield that can support your knowledge in investing. In order for the investment to run smoothly and optimally, you need a trusted partner.
Investment in Money Market Mutual Fund Type with DBS Treasures
Mutual Funds as investment instruments are in great demand because of minimal risk. In addition, this investment has a better level of security. Suitable for those of you who have a low or high loss tolerance.
Investing in Mutual Funds also allows good diversification to raise potential profits and lower losses. With DBS Treasures priority banking, you can invest in various types of Mutual Funds.
As your wealth management partner, there are several advantages when you invest. Let's look at the following advantages.
- Professional Investment Management
All Mutual Fund investment options at DBS Treasures are managed by leading Investment Managers to optimize product performance.
- Gain Insights to Guide You Investing
Supported by a team of financial experts who are reliable and proactive in delivering market analysis and the latest opportunities.
- Reduce Risk Through Diversification
Diversification is an attempt to allocate investments in several instruments. This is important to minimize losses. Diversification of the spread of your funds will be carried out to various types of investment assets to reduce risk.
- Easy Transaction
Easily and practically do transactions and various things. Buying, selling, switching, and SID (Single Investor Identification) registration can be done easily through the digibank by DBS Application.
You will be supported by curated market analysis communicated by a team of financial experts. Gain the latest opportunities that have been adjusted to your risk profile and portfolio needs, driven by Artificial Intelligence/Machine Learning (AI-ML).
This insight is equipped with curated solutions related to investment (Grow) and insurance (Protect), so you can quickly and confidently invest through your preferred media.
Those are the advantages when investing with DBS Treasures. With the right wealth management partner, your investment will be more secure.
After knowing important terms such as average yield and return, now is the time for you to take steps to invest. In Mutual Funds, the type of Money Market Mutual Fund is also the most widely chosen.
This is because of all its advantages and potential benefits. Find out the comprehensive information by accessing the following link https://www.dbs.id/id/treasures/investasi/mutual-funds/what-is-mutual-funds-and-equities
