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  • Category: Miscellaneous

    Know about Yield to Maturity (YTM)

    Many investors who are averse to daily volatility of equity and equity-based instruments, but want better return than PPF or similar other assured return instruments, invest in debt mutual funds. To decide ideal debt mutual fund(s) for individual investor, various factors are taken into consideration. These are: (a) Coupon rate, (b) Yield, (c) Yield To Maturity (YTM), (d) Modified Duration and (e) Weighted Average Maturity (WAM). In this thread we are going to discuss about Yield To Maturity (YTM), a very important factor to chose debt mutual fund.

    1. YTM can be defined as the total return which an investor can expect from a bond if it is held till the date of its maturity.
    2. YTM is generally expressed as the annualised rate of return, if coupon payments are made on a semi-annual basis, However, YTM can also be calculated on a six-monthly basis.
    3. At the time of compounding YTM, it is assumed that all coupon payments are re-invested at the same rate as the bond's present yield.
    4. YTM is used as a measure to compare various bonds with different maturities and coupon rate and structure.
    5. YTM is the most useful factor to estimate whether a bond would be useful for an investor to invest, or not.
    6. As debt mutual funds invest in various bonds of different yield, coupon rate and duration, YTM is very important for judging the suitability of a debt fund for an individual investor.
  • #597641
    Can you please simplify the explanation by explaining the financial terms used repeatedly in the thread. For instance, what is 'coupon rate'. This is just to understand the thread better.
    "A love affair with knowledge will never end in heartbreak" - Michael Garrett Marino

  • #597646
    Partha this forum thread seems to be very important and guide to those who make regular investments and I wish you can create a wonderful article out of it and get more name and fame.
    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #597650
    It seems you are an expert in investment. You can be a good guide to ISCian who do not know ABCD of investment. Will you start a new thread and suggest the ways and means to invest viz, areas where we can invest, in which area we get high yield, which is the safest investment etc?

    No life without Sun

  • #597660
    Thanks to the Members who have gone through this 'boring' (according to my wife) thread.

    Ms. Juana: In simplest term, coupon rate is nothing but the interest rate (generally calculated annually) which is paid to the investor if he/she continues to hold the bond. It is pre-determined and has no relation with the prevailing rate of the bond imarket.

    Mr. Mohan: When my mood permits, I put down my knowledge (?) and information in articles. Kindly go through my list of articles. I have written a few articles on mutual funds and general finance.

    Mr. Sun: Investment is just like a sea. I have knowledge (or better information) about a very limited number of investment instruments. If you have any specific query on these areas about which I have some information, I will gladly share.

    Non-violence is the greatest Dharma; So too is all righteous violence.

  • #597674
    This is a very good subject. Many wealth managers come and tell different aspects about investments and finally conclude that the scheme what they have suggested is the best. In the end we will be a confused person. So Mr. Partha can help the people who are interested in these funds by sharing his knowledge in this channel.
    always confident

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