Calculating Yield and Return |
|
Although your fees cover the administrative services needed to manage your 401(k), it’s up to you to keep track of how your investments are doing. You can measure your portfolio’s earnings in two ways: through yield, or through return.
Variations on Return
If you’ve contributed different amounts to different investments, you might want to calculate your investments’ percent return instead. And, if you’ve held an investment over a long period of time, you might want to calculate its annual percent return, or the percent return divided by the number of years you’ve held the investment. For instance, a $1,000 bond held over three years with a $145 return has a 14.5% return but a 4.83% average annual return.
When you calculate your return, you might also want to account for annual inflation. Calculating your real return will give you an idea of the buying power your earnings will have in a given year. You can determine real return by subtracting the inflation rate from your percent return. For instance, an investment with 10% return during a year of 3% inflation has a real return of 7%.
You may want to refer to the fund's prospectus, website, or annual and semi-annual reports for more information on yield and total return on specific funds.
|
