How to Calculate the Average Yield on Investments

by C. Taylor, Demand Media
    Averaging variable yields calculates a more stable metric to evaluate returns.

    Averaging variable yields calculates a more stable metric to evaluate returns.

    Not all investments offer consistent, fixed-dollar returns. Many sound investment opportunities fluctuate, but add a positive yield to your portfolio. As an example, maybe you invested in a variable interest rate annuity that pays a different amount each year, or you purchased several investment properties that produce different rental returns. Averaging the return from these investments equalizes their variability and allows you to calculate the average yield over time or across multiple investments.

    Average Yield Across Time

    Step 1

    Add the total return for each period and divide by the number of periods to calculates your average return. As an example, if a variable-rate annuity paid $200, $175 and $225 in three consecutive years, add each of those returns and divide by 3 to calculate an average return of $200.

    Step 2

    Divide the average return by your original investment to calculate your average yield. Continuing with the example, if you invested $5,000, divide $200 by $5,000 to calculate an average yield of 0.04.

    Step 3

    Multiply by 100 to convert the average yield into percentage format. In the example, 0.04 times 100 produces an average annual yield of 4 percent.

    Average Yield Across Investments

    Step 1

    Add the periodic returns for each investment. As an example, if you invested in three rental property that produced net profits of $100, $200 and $300 each month, add each figure for a total monthly profit of $600.

    Step 2

    Add the total costs of each investment. Continuing with the example, if each rental property required a down payment and closing cost total of $10,000, $12,000 and $11,000, add each cost for a total investment of $33,000.

    Step 3

    Divide the net profits by the total investment to calculate average yield. In the example, divide $600 by $33,000 to calculate an average monthly yield of 0.018, or 1.8 percent.

    About the Author

    C. Taylor has been a professional writer since 2009. He has written for online publications and the "Journal of Asian Martial Arts." Taylor specializes in martial arts, traveling, sciences and computer repair. He received a Master of Science in wildlife biology from Clemson University and a Bachelor of Arts in biological sciences from the College of Charleston.

    Photo Credits

    • Comstock Images/Comstock/Getty Images