Yield is accepted as one of the best measures for investors
seeking regular income from their investment choices. For bond
investors, this is the interest income from securities. On the
other hand dividends from income producing stocks are the route via
which investors in equity expect to receive income.
Yield is usually measured over a specific period of time. It only
accounts for interest or dividend income and does not include
capital appreciation. Even though the income produced may be for a
specific period of time, it is represented as an annualized figure.
This is because it is expected that the same level of income will
be returned in the future.
Yield vs YTD Return
This implies that yield is a forward-looking metric and is
prospective in nature. This is
in contrast to year-to-date return which also takes into account
capital gains. This is why it is often described as the total
return from an investment. It is also essentially a measure of past
performance and represents earnings accrued during a specific
period in the past.
Mutual Funds Investing in Derivatives
Mutual funds often invest in derivatives in order to manage risk or
Another goal may be to gain exposure to assets which the fund
cannot directly invest in. Normally, a small portion of total
assets are allocated towards this purpose. However, some mutual
funds may exclusively invest in derivatives. This is a common
strategy when tracking an index, such as the Dow Jones or S&P
500. The derivatives utilized in these cases are usually
options or futures contracts
In some cases, however, fund managers may have more aggressive
goals. They may seek to outperform daily returns from indices by a
large degree. In this case even small gains in the benchmark may
result in high returns. At the same time, losses are also
Despite this drawback, the steadily rising population of retired
individuals will continue to opt for such investment choices. This
is because they carry the promise of higher income. In some cases,
this results in funds who not only have impressive yield numbers
but also high YTD returns.
Below we are presenting three mutual funds with the best possible
Zacks Rank, each of which has impressive yields as well high YTD
Mutual Fund Picks
PIMCO Fundamental IndexPLUS AR A
Launched in June 2005, the fund has total assets of $3.08 billion.
The fund aims to provide total returns which are greater than that
of the S&P 500. It invests in Enhanced RAFI US Large
derivatives. The Enhanced RAFI US Large is constructed using a
proprietary approach developed by Research Affiliates, LLC. The
fund has a yield of 9.61%.
The fund holds 883 assets and the asset is most invested in is
Erauslt Trs Equity 1ml+26.5 *Bullet* Brc, which makes up 34.78% of
its assets. The next two, FNMA and Erauslt Trs Equity 1ml+35 Jpm,
together make up 21.34% of its assets. The fund has a year-to-date
return of 27.82% and has a Zacks Rank #1 (Strong Buy).
PIMCO CommoditiesPLUS Short Strategy A
This is a much smaller fund with total assets of $12.79 million and
was launched in September 2010. It invests in short positions on
the Dow Jones-UBS Commodity Index Total Return. The fund maintains
these short positions using a mix of commodity-linked derivatives.
The fund has a yield of 8.81%.
The fund holds 50 assets and its top 10 holdings account for 21.40%
of its investments. The asset it is most invested in is Pimco
Cayman Commodity Fund Iv, Ltd, which makes up 14.17% of its assets.
The next two, Fore Clo Ltd 2007-I FRN and US Treasury Note,
together make up 3.26% of its assets. The fund has a year-to-date
return of 9.51% and has a Zacks Rank #1 (Strong Buy).
PIMCO International StocksPLUS AR Strategy (Unhedged)
Launched in November 2006, this is a large fund with total assets
of $1.41 billion. The fund invests primarily in foreign equity
derivatives. These derivatives are backed by a portfolio consisting
of fixed income instruments. A maximum of 20% of its assets may be
invested in junk bonds with a minimum rating of "B". The fund has a
yield of 8.15%.
The fund holds 697 assets and the asset it is most invested in is
Efa Up Trs Equity 3ml+30 *Bullet* Bps which makes up 33.31% of its
assets. The next two, Efa Up Trs Equity 3ml+0 Boa and Efa Up Trs
Equity 3ml-15 Bps, together make up 46.61% of its assets. The fund
has a year-to-date return of 16.97% and has a Zacks Rank #2 (Buy).
Despite investing in derivatives, these funds have strong yield
patterns as well as impressive YTD returns. This is why these make
for excellent choices to add to your portfolios.
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