The most accurate measure of the long-term
yield on a bond investment is its yield to maturity (YTM).
That figure is calculated using the
bond's interest rate, the current price, the par value and
the years to maturity.
While yield to maturity may be too complex
to figure on your own, the current yield to maturity is reported
regularly online and in the financial press for the most frequently
traded issues. And you can work with your financial adviser to
evaluate the long-term potential of your own bond holdings.
Unlike bonds, bond mutual funds don't
have a yield to maturity, though they do have a current yield.
The reason is that bond funds don't have maturity dates or
fixed interest rates since they hold a portfolio of bonds with
different terms and rates.
