Yield Definition

Meaning/ Definition:

Companies pay interest on bonds and dividends on shares on the face value (nominal value) of the instrument. When these instruments are freely traded on stock exchanges, the price actually paid by the investor for the share or bond is different from the face value. Therefore, when the interest or dividend is calculated on the actual price paid, then the return is different from the one calculated on the face value. This is the actual return or yield obtained by the investor.

Examples:

Following example illustrates interest yield on a bond:

A separate article dividend yield explains with example in the context of dividends.

Related Links:

Distinction Between Rate of Interest and Interest Yield

What is the Relationship Between a Bond's Market Price and Its Yield to Maturity?

Day Trading Definition

Stock prices constantly fluctuate on the stock markets. A number of Speculators called day-traders try to make a living out of profits from these minor price variations. Their intention is not to hold the stocks for long nor to take delivery but to simply sell off the same day for a profit.

As a result of globalization and advent of fully automated screen-based electronic trading systems the margins have not only become wafer thin but steep market crashes on the back of global events have the potential to cause more losses to day-traders than gains

Since the price differences within a day are small, stockbrokers extend a facility called margin trading which is highly dangerous and must be totally avoided.

People engaged in such speculative activity under a respectable garb of trading in stocks have created misunderstanding in the minds of a number of citizens causing them to shy away from investing in stocks which when invested prudently and for ling periods of time is the sure vehicle to financial freedom and wealth.

A man engaged in screen-based trading in stocks

Attribution:

Image used here is an adaptation of Pictures/ Icons used here are produced by Freepik from www.flaticon.com