Enhance Your Investment Strategy With Bond And Earnings Yields

07 Sep 2023

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Enhance Your Investment Strategy With Bond And Earnings Yields

While determining your equity and debt investment strategy, turn to bond and earnings yield for guidance.

Bond Yield

Bond yield is the return an investor earns on a bond, typically expressed as a percentage of its face value. It is influenced by factors like the bond's interest rate (coupon), current market price, and time to maturity. Yields help investors assess the attractiveness and risk of the bond investment.

Bond Yield = Interest Income / Market Price

Earnings Yield

The earnings yield represents the percentage of earnings an investor can expect to receive for each rupee invested in the stock. A higher earnings yield indicates a potentially better value investment, as it implies a higher return relative to the stock's price.

Earnings Yield = 1/P/E

Earnings per share / Market price per share X 100

Nifty Earnings Yield = Nifty Index Expected 1-year Forward EPS / Nifty Index Value

Bond Yield vs Earnings Yield in current markets

To understand which of the two is trending going by current market valuations let us calculate the present Bond Yield and Earnings Yield.

The 10-Yr Gsec (government bond) is trading at = 7.19%

Nifty is trading at 19,505

Bond Yield (7.19%) > Equity Yield (5.15%).

While your financial goals and risk appetite determine your asset allocation, Bond & Earnings yield strategy can help you hone allocation across equity and debt assets..

# As on 4th September 2023

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