Bond Fund Yield and Returns

How do bond funds compute returns? Several ways:

Historical bond fund income yields get complicated. Some examples: Distribution yield or income produced over the latest 30-day period. Or income projected on an annualized basis. Results are then divided by the share price. Or take the trailing 12-month yield, based on income paid over 12 months, divided by the share price, plus capital gains over that time.

To simplify matters: Look for the SEC yield, calculated under SEC procedures. It approximates total yield in a bond portfolio for the past 30 days, assuming the bonds are held to maturity and portfolio dividends are reinvested. It takes into account all expenses and fees. The SEC yield is close to what is termed, Net Yield to Maturity.

But income is only part of the equation with bond fund income. You have to consider return, which is composed of income from yield and the change in the fund’s price.

For your simple convenience, stick to SEC yield and always be aware of the total return by quarter or for any period you hold the fund.