What is a weighted average yield?
Dear average yield is a method of measuring the performance of the stock portfolio, which takes into account how much capital is placed in each investment. Since more money could be placed in certain assets than in others, it makes sense for these assets to have a greater effect on the portfolio performance as a whole. To calculate the weighted average yield, any asset should be measured in terms of its return on its return and percentage of the entire portfolio it includes. By multiplying these two percent for each asset and then adding all together will bring a weighted average. Finally, the most important thing is how their entire portfolio works. It may be difficult to measure if these different securities have different amounts of money. Fortunately, investors can use known measurement weighted average yield as a way of assessing the performance of the entire portfolio at a time.
as an example of how weighted average yield works PImagine assessing the investment portfolio, imagine that the investor placed money in three different shares. He bought shares worth $ 1,000 (USD) A, $ 1,500 USD B and $ 2,500 USD C. At the end of the year, at the end of the year, stocks of four percent, stock B gained by five percent and shares gained by six percent.
simply add up three percentage profits and the division three leaves the arithmetic average of five percent to custom reference. This does not take into account the fact that shares C was half the entire portfolio, while shares A and B joined for the other half. The weighted average return is first remarks how much portfolio each stock contained. In this case, the shares to be 20 percent, ie $ 1,000 out of a total of $ 5,000, shares B were 30 percent and shares C were 50 percent.
knowledge of these sums, weighted average yield can now be calculated by multiplying the percentage of the portfolio, each shares take over the level of return of each of them. For stocks and it is 0.2 multiplyWell by a four % yield or 0.8. The other two sums are five percent multiplied by 0.3 for supplies B or 1.5 and six percent multiplied by 0.5 for supplies C or 3.0. Adding all these sums adds a weighted diameter of 5.3 percent, which is a more true portfolio return indicator than the arithmetic average of individual yields.