Horizon Yield Calculator

Horizon Yield Formula:

\[ Yield = \left( \frac{\text{Future Value}}{\text{Present Value}} \right)^{\frac{1}{\text{Years}}} - 1 \]

Horizon Yield:

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1. What is Horizon Yield?

Horizon Yield, also known as holding period yield or total return, measures the annualized rate of return on an investment over a specific time period. It accounts for both capital appreciation and any income generated by the investment.

2. How Does the Calculator Work?

The calculator uses the horizon yield formula:

\[ Yield = \left( \frac{\text{Future Value}}{\text{Present Value}} \right)^{\frac{1}{\text{Years}}} - 1 \]

Where:

Future Value — The ending value of the investment ($)
Present Value — The initial investment amount ($)
Years — The investment period in years

Explanation: This formula calculates the compound annual growth rate (CAGR) that would take the present value to the future value over the specified number of years.

3. Importance of Horizon Yield Calculation

Details: Calculating horizon yield is essential for comparing investment performance, evaluating portfolio returns, making informed investment decisions, and setting realistic financial goals.

4. Using the Calculator

Tips: Enter the initial investment amount as Present Value, the ending investment value as Future Value, and the investment period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is horizon yield different from annual return?
A: Horizon yield is an annualized figure that smooths returns over the entire period, while annual return shows performance for each individual year.

Q2: Does horizon yield account for reinvested dividends?
A: Yes, if the Future Value includes the value of reinvested dividends or other distributions.

Q3: What is a good horizon yield?
A: This depends on the asset class, risk level, and market conditions. Generally, investors compare yields to benchmarks like market indices or inflation rates.

Q4: Can horizon yield be negative?
A: Yes, if the Future Value is less than the Present Value, indicating a loss on the investment.

Q5: How does investment frequency affect the calculation?
A: This formula assumes a single initial investment. For regular contributions, a different calculation (like internal rate of return) would be more appropriate.