The average yield on an investment typically refers to the income from an investment divided by the number of years you have held it. It is useful to calculate the average yield every few years to gauge whether an investment is adding value to your portfolio. You can express the average yield as a dollar figure, or as a percentage. For purposes of average yield calculation, assume that no income has been withdrawn from the account.
Find the beginning value of your investment. If you cannot recall your initial investment amount, you can find this data on your paper or online statements. For example purposes, the starting value is $2,000.
Get the most recent year-end balance of your investment. In this example, the year-end balance is $2,500.
Deduct the year-end balance from the beginning balance. Using the example, $2,500 minus $2,000 equals $500. This represents your total income from the investment.
Total the number of years you have owned the investment. In this example, you have owned the investment for five years.
Divide the total income by the number of years of ownership. Continuing with the example, $500 divided by 5 equals $100. Your average yearly income is $100.
Divide the average yearly income by the amount of the original investment to arrive at a percentage figure. Continuing with the above example, divide $100 by $2,000 to arrive at 0.05. Convert 0.05 to a decimal to find your average yield per year is 5 percent.
- Business Dictionary: What is Average Annual Yield?
- The Free Dictionary: Average Annual Yield
- Greg McBride: Certified Financial Accountant, Senior Financial Analyst, Bankrate.com (via email)