Understanding yields

Aged

This is a follow-on on from my other recent thread, but it's a separate question so I've started a new thread - hope that's OK. Talking about 'yields', I'm not sure I fully understand them. To give an example, I've been looking at the stated historic yields of my existing funds, and the fund that has done the best for me over the past few years has one of the lowest yields - why is that? The fund in question is the Vanguard FTSE Developed World Ex-UK Equity Index fund - historic yield 1.24%

El_Torro

In this case yield probably means the dividends paid annually. If you had an Inc fund as opposed to an Acc fund this would be the income you would expect.

As you have experienced, a global tracker will have a good growth but relatively low yield. There are companies out there with an impressive growth over the years that pay no dividends at all. For example Amazon. 

Yield is important if you plan to take an income from your funds. If not I would just worry about total return.

dunstonh

Yield is income.   It is not the total return.     Most funds are return-focused. i.e. the unit price goes up and you get a small bit of income.  Yield is just a small part of it.

The US, which makes up most of the tracker, is a growth market. Not a value market.  

In this cycle, growth has been king, driven by the US.  In the previous cycle, value was king (and the US did poorly in that period).     

Yield has been out of fashion since 2008, but it will come back at some point. 

Posters here from 20 years ago will recall the domination of HYP threads on the site.   In much the same way trackers now dominate as this cycle has favoured them.  

Aged

dunstonh said:

Yield is income.   It is not the total return.     Most funds are return-focused. i.e. the unit price goes up and you get a small bit of income.  Yield is just a small part of it.

The US, which makes up most of the tracker, is a growth market. Not a value market.  

In this cycle, growth has been king, driven by the US.  In the previous cycle, value was king (and the US did poorly in that period).     

Yield has been out of fashion since 2008, but it will come back at some point. 

Posters here from 20 years ago will recall the domination of HYP threads on the site.   In much the same way trackers now dominate as this cycle has favoured them.  

Thanks Dunston, I understand now. A bit of a learning curve for me with moving from accumulation to retirement phase!

aroominyork

dunstonh said:

In this cycle, growth has been king, driven by the US.  In the previous cycle, value was king (and the US did poorly in that period).     

Yield has been out of fashion since 2008, but it will come back at some point. 

If you are saying that growth and yield - or, as you have written elsewhere, US and ex-US - alternate between cycles, are there any metrics which tell us when we are in a new cycle, or do we just wait until value or ex-US dominate and then say "that tells us we are in a new cycle"?

dunstonh

If you are saying that growth and yield - or, as you have written elsewhere, US and ex-US - alternate between cycles, are there any metrics which tell us when we are in a new cycle, or do we just wait until value or ex-US dominate and then say "that tells us we are in a new cycle"?

Hindsight is the main metric

Historically, US exc Global  and Global exc US cycle.   Often, it coincides with exchange rate movements.   

Yield is always available as a strategy. It's just that it is outpowered by growth at times and vice versa.   Sometimes you have to accept that. Especially if yield is meeting your objectives.   

aroominyork

dunstonh said:

If you are saying that growth and yield - or, as you have written elsewhere, US and ex-US - alternate between cycles, are there any metrics which tell us when we are in a new cycle, or do we just wait until value or ex-US dominate and then say "that tells us we are in a new cycle"?

Hindsight is the main metric

Historically, US exc Global  and Global exc US cycle.   Often, it coincides with exchange rate movements.   

It's been a one pedal cycle for a long time. Could it carry on for several more years?

dunstonh said:

If you are saying that growth and yield - or, as you have written elsewhere, US and ex-US - alternate between cycles, are there any metrics which tell us when we are in a new cycle, or do we just wait until value or ex-US dominate and then say "that tells us we are in a new cycle"?

Yield is always available as a strategy. It's just that it is outpowered by growth at times and vice versa.   Sometimes you have to accept that. Especially if yield is meeting your objectives. 

Yes, as Linton said "in retirement the required income is the dog and how you achieve it the tail."