I just realized what the word “yield” means and how important it is for people who want to invest seriously. If you understand yield well, choosing assets becomes much easier.

Simply put, yield is the rate of return that tells us how much profit an invested amount will generate over a certain period. It is expressed as a percentage per year, making it easy to compare returns from different assets.

How to calculate yield depends on the type of investment, but the basic formula is (current price – purchase price) divided by the purchase price, then multiplied by 100%. For example, if you buy a bond at a price of 1,000 baht with an interest rate of 5% per year, your yield is 5%.

There are many types of yield you should know. Dividend yield is dividends from stocks. If a stock costs 100 baht and pays 10 baht in dividends, the dividend yield is 10% per year. Bond yield is the return from bonds. Earnings yield is net earnings relative to the stock price. There is also mutual fund yield, which is calculated based on the fund’s total income.

What you need to understand is that yield depends on many factors. The first is the type of investment. Stocks often offer higher yields than debt instruments, but they also come with higher risks. Market conditions have a big impact as well, such as interest rates set by banks, economic conditions, and the investment period. The longer you invest, the higher the chances the expected yield will be.

Risk is another important factor. Investments with higher risk need to offer higher yields to compensate for that risk. A company’s financial management policies are also relevant, such as dividend payments and investments in research and development.

It turns out that yield and return are different. Yield is the expected return, excluding changes in the asset’s price. Return is the actual return you get, including gains or losses from price changes.

Which assets have the highest yield depends on your goals and the level of risk you are willing to accept. Technology stocks and growth stocks tend to have high yields in the long term, but they also involve high risk. Real estate can deliver strong returns as well, especially in expanding markets. Debt instruments like government bonds generally have lower yields, but they are less risky. Gold is a safe asset with a moderate yield. Digital currencies are an option for higher yields, but they carry extremely high risk.

Most importantly, it’s crucial to understand what yield is, because it helps you choose the assets that fit your situation—whether you want to generate income now or prepare for the future. Just as important is to consider the risks you are ready to take and your investment time horizon, so that your capital can work as efficiently as possible.