Investment Income Ratio

  

Categories: Investing, Stocks, Bonds

See: Yield.

You invested a million bucks in a stock that yields 6%. Or said another way, the investment of a million bucks gets you 60 grand a year.

That investment income ratio...the ratio of income to invested capital...is the yield of the investment. And the magic ratio is calculated as the annual income returned to the investor divided by the capital invested.

Related or Semi-related Video

Finance: What is an Income Fund?0 Views

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Finance a la shmoop. What is an income fund? Well it's a fund designed to

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produce income for its investors yeah shocking to hear that I bet. That's [Definition of an income fund written on a 100 dollar bill]

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income, cash like bond interest and equity dividends they come in both [Different types of income pointing to a pile of cash]

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managed and unmanaged forms like mutual funds and index funds yeah they both [The two types of forms are shown]

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have Income Fund flavors and they exist solely to distribute cash to investors

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from which you know those investors can purchase luxury items like food and heat. [Income fund distributing cash]

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All right well who buys these income funds, while mostly old people generally [Old woman on the phone]

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retirees people who can't take a ton of risk and who no longer work for their

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cash and while they need it to come from their savings [ATM]

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you know the cash to pay the rent in the food thing and those savings have been

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socked away for years via hardwork harvesting stuff in the fields or [Money shoved into a sock]

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driving people to the airport or you know making assistants disappear and [Bird flies into a hat and disappears into a plume of smoke]

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very generally speaking income funds don't really grow at least not all that

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much, many of them have target distribution levels like three four five

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percent so that excess cash is sent back to the fund holders on a regular steady

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basis and the funds boringly live to throw off cash another day, tada! [Guy pulls cash out of the magicians hat]

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That's how it goes..

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