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Holding Period Yield: Formula & Examples

Instructor: David Bartosiak

Dave draws off his years of experience as a Financial Advisor and Analyst to teach others all about finance and the investing world.

One of the simplest ways to calculate investment performance is by using the holding period yield formula. This lesson will explore the information needed to calculate holding period yield and provide several examples of how to make the calculation.

Calculating Returns that Matter

When looking at investment returns, investors get all sorts of information thrown their way. They see historical returns over several time frames, yields, distributions and all sorts of things. There is really only one return that should matter to investors, and that's the return they actually receive on their money while they are holding the investment.

One of the simplest calculations an investor can make is known as the holding period yield. The holding period yield is the rate of return including dividends and interest realized on an investment. The calculation is relatively easy to know. There are a few things you'll need to know before making the calculation:

  • End Value - the account value of the investment at the end of the holding period
  • Beginning Value - the account value of the investment at the beginning of the holding period
  • Income - Any dividend or interest on the investment during the holding period which were paid outside of the account

Once you know these three bits of information the calculation for holding period yield is simple:

Holding Period Yield = ((End Value + Income - Beginning Value)/Beginning Value)

Holding period yield is expressed as a percentage, as are most yields. Using this calculation, holding period yield can be positive as well as negative.

Real-World Application

Let's say John has an investment account at ABC Brokerage he started with $10,000. John finds a new statement for his account and wants to calculate his holding period yield. He sees that this account hasn't had any income but currently is valued at $12,000. His holding period yield would be:

HPY = ($12,000 + $0 - $10,000) / $10,000

HPY = $2,000 / $ 10,000 = 0.2 or 20%

John's holding period yield over the period is 20%.

John has another account he also started with $10,000 but provided some income for him. This account paid him $500 in income. At the end of the holding period, the account value was $9,750.

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