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What is an SEC Yield?

Jim B.
By
Updated Feb 18, 2024
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SEC Yield is a measurement of the yield of bond funds established by the Security and Exchange Commissions, or SEC, in the United States. The SEC requires bond funds to report this information to investors as part of an investment prospectus. This measurement allows the investors to compare varying bond funds with one another over the 30-day period from which the yield is taken. While it is a good measuring stick because it measures all bond funds in the same manner, the SEC Yield can be misleading because it measures the funds in terms of the bonds within them at the time when, in actuality, most funds trade bonds actively and rarely hold them to maturity.

Bond funds, which group individual bonds together as an investment entity, are attractive options to many investors looking for a safe yet effective way to grow their portfolio. Such funds have management that releases the investor from the responsibility of researching individual bonds, and they also provide enough diversity that a few underperforming bonds won't weigh them down. By studying the SEC Yield of different bond funds, investors can get a rough idea of the type of return on investment they can expect from each specific fund.

What the SEC Yield measures is the current net market yield of a specific bond fund. The SEC calculates this number by taking the interest earned from the fund per share, taking into account any extra expenses or sales charges attached to the funds. This number is then divided by the cost per share of the fund, and the resulting number is the yield for that specific fund.

The SEC uses the data provided by the bond funds for the most recent 30-day period to calculate the yield. As all bond funds are measured using these same statistics, the yield essentially provides level ground for measuring all bond funds against one another. This allows the investor to simply look at the different yields and compare to see how well each fund is performing.

If the bonds within each individual bond fund were held all the way to maturity, the SEC Yield might be able to predict the payouts of the funds well into the future. In reality, the portfolio of a bond fund is ever-changing, with underperforming bonds being discarded in favor of newer, potentially profitable ones. For this reason, the SEC Yield is better at measuring the short-term success of a bond fund than it is at predicting a fund's potential in the future.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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Jim B.
By Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own successful blog. His passion led to a popular book series, which has gained the attention of fans worldwide. With a background in journalism, Beviglia brings his love for storytelling to his writing career where he engages readers with his unique insights.
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Jim B.
Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own...
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