The Importance of Yield

Yield is often overlooked in the pursuit of growth but it is an important part of any investment.

Yield is the investment income paid by many investments.  For example the dividends from shares, or the rents paid on property.

For investors seeking income yield can supply that income without having to eat into capital.  If the investment gives capital growth too then the investor has the income they need but also a chance to get ahead of inflation.

In many cases, the intial yields from investments will be lower than bank or building society interest rates howver if the interest is drawn from deposit accounts, over the long term the value will be eaten away by inflation.  Also the interest on deposit accounts is variable and at times will fall whereas over the long term the yield from an investment will tend to grow as the value of the investment grows.

 Yield is especially valued when investment markets come under pressure.  When times are bad and company values fall, which would you prefer.  An investment that does not pay any yield or one that give you a few percent.  In difficult times higher yielding investments often grow in value as investors move into them because of their attractive yields.  This makes higher yielding investments attactive for the more cautious investor.

Blue chip shares often give good yield because the dividends tend to be higher.